Stocks rise as investors dismiss inflation
In the last months, the global stock market has been weighed by worries of spiking inflation. Investors worried the jump in prices would increase costs for companies. However, stocks reached record highs since investors shrugged off the concerns regarding higher than expected prices.
Most of the stocks rise in Europe after S&P 500 highs
The historical highs registered yesterday by the S&P 500 serve as a boost for European equities. However, they are still in the process of digesting the ECB meeting and the US inflation data.
Only the Dax starts the last session of the week in negative. Still, the German stock market index is not showing any definite trend. It is in an environment of low activity.
Dax started the day with a loss of 0.03%. Meanwhile, the Cac 40 increased by 0.08%. The FTSE 100 added 0.23%, and the Mib gained 0.04%. The Euro Stoxx 50 is up by 0.06%.
Analysts don’t believe the S&P 500’s new all-time high will serve to encourage investors in Europe.
ECB maintains inflation to be temporary
The ECB meeting passed without any significant changes. The institution kept its reference interest rate intact at 0.0%, the deposit facility stays at -0.5%, and the marginal credit at 0.25%. In addition, the ECB declared in its statement that it would maintain the current monthly asset purchase rate of its Pandemic Emergency Purchase Fund. It is somewhat higher than the one it held a few months ago, at the beginning of the year. Likewise, concerning inflation, the ECB stated that it believes its rebound is temporary and will not be prolonged. In the Eurozone, as in the US, there is no risk of overheating, the institution asserted.
In the subsequent press conference, Lagarde pointed out that the risks to the growth of the eurozone economy are now balanced. She affirmed that the ECB expects economic activity to accelerate in the second half of 2021, strongly driven by domestic demand.
However, the recovery will be accompanied by inflation, and the bank’s projections include a rise in prices. The ECB expects inflationary pressures to moderate once transitory factors are overcome.
Wall Street closes in green after the inflation data
Wall Street closed in positive territory this Thursday. The selective S&P 500, one of its leading indicators, registered a new record. It followed the highest inflation data in the United States since 2008.
According to data at the close of the NYSE session, the S&P 500 increased by 0.47% or 19.63 points and stood at 4,239.18.
Meanwhile, the Dow Jones Industrials advanced by 0.06% or 19,10 points, up to 34,466.24.
The Nasdaq Composite Index, trading the major tech companies, rose by a solid 0.78% or 108.58 points to 14,020.33.
By sectors, the highest gains were led by health companies, real estate, and technology. The most affected were financial companies.
Wall Street reacted to mixed data on the US economy by buying. As a result, the S&P 500, the market’s broadest indicator, lifted to an all-time high after a month of swings.
Inflation in the US was interpreted as temporary
On the one hand, the consumer price index increased by 0.6% in May, placing year-on-year inflation at 5%. It’s the highest registered in the country since August 2008.
The rise in inflation, which increased fears last month over the possibility that the Federal Reserve would begin its withdrawal of stimulus, was interpreted this time as temporary.
Adam Crisafulli, an analyst at Vital Knowledge, assumes that CPI will not change the narrative drastically. There still are indications that the rise in inflation will subside in the coming months.
After the news, the yield on the 10-year Treasury bond increased slightly. However, it ended up falling to 1.44%.
On the other hand, the weekly number of applications for unemployment benefits fell to 376,000 last week. It is the lowest figure over the previous 15 months.
Among the thirty values of the Dow Jones, the advances of Walgreens (3.52%), Merck(MSD)(2.92%), Amgen (2.14%), and Cisco (1.87%) stood out.
The most significant losses were for Caterpillar (-3.84%), Goldman Sachs (-2.45%), and JPMorgan (-1.52%).
None of the G7 stock indices meet climate targets
Expectations are running high ahead of the G7 leaders’ summit in London.
Stock market investors will be looking for any details regarding the possible opening of trans-Atlantic air travel.
None of the large stock market indices of the G7 economies is aligned today with the emission reduction targets included in the Paris Agreement. That demands more commitments from the companies that form them in this area.
The CDP Worldwide and UN Global Compact prepared the report. It points out that, on average, the companies included in these indices are on a trajectory that would raise the global average temperature 2.95 degrees Celsius above pre-industrial levels by the end of the century. So it’s far from the goal of 2 degrees and the recommendation of 1.5 degrees of that pact.
Aligning finance with the Paris Agreement
Four of the seven indexes analyzed are, in fact, on a dangerous trajectory of 3 degrees Celsius or more. It is led by the Canadian S&P TSX 60 and the British FTSE 100, both with significant contributions from the fossil fuel industry.
According to the study, the US S&P 500, Italian FTSE MIB, French CAC 40, or Japan’s Nikkei 225 are also not meeting the targets.
German DAX 30 is the one that comes closest however fails to achieve it.
More than 70% of its companies committed to emission reduction targets.
Those responsible for the report emphasize that it is about the companies that make up these indices and the billions of dollars that flow to these values.
For this reason, CDP and the UN demand that financial institutions also align their investment portfolios with the objectives of the Paris Agreement.
Lila Karbassi, head of programs for the UN Global Compact, stated that
G7 companies have the potential to create an effect of positive change throughout the global economy. This report stresses the urgent need for markets and investors to meet the goals of the Paris Agreement.
