Stocks rise and dollar falls as investors weigh policy prospects

Stocks rise and dollar falls as investors weigh policy prospects

Global equities rose on Friday, while the euro and pound rose against a softer dollar as investors estimated how much major central banks would tighten monetary policy to curb inflation.

An FTSE gauge of global equities rose 1.6 percent, with Wall Street’s S&P 500 rising 1.2 percent late morning in New York and the tech-heavy Nasdaq Composite rising 1.1 percent.

Europe’s regional Stoxx 600 meters closed 1.5 percent higher and Hong Kong’s Hang Seng rose 2.7 percent, knocking it out for six days.

“It appears to be a global risk-on rally amid lower rates and a weaker dollar,” analysts at JPMorgan wrote earlier on Friday. “The market remains focused on next week’s [consumer price index] print,” they added.

US inflation data will be released on Tuesday, with economists polled by Reuters expecting August to hit 8.1 percent year-on-year, up from 8.5 percent in July.

Friday’s measures came a day after the European Central Bank raised interest rates by 0.75 percentage point to 0.75 percent, after it cut borrowing costs by half a percentage point to zero in July for the first time in more than a decade. The new UK government also announced a package worth an estimated £150 billion on Thursday to protect Britain from rising energy prices.

In currencies, the euro bounced 0.5 percent and traded just above parity with the dollar, shortening a sharper rally earlier in the day. The single currency is down more than 11 percent this year as economic uncertainty and inflationary pressures – fueled by Russia’s invasion of Ukraine and a strain on gas supplies – have driven people toward the dollar’s perceived security.

The pound gained 0.8 percent to $1,159 after falling to its lowest level since 1985 earlier this week. The Japanese yen rose a staggering 1.8 percent to ¥141.49, after hitting ¥144.98 on Wednesday – the weakest level against the dollar in 24 years.

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