Global equities rise, dollar falls after record US retail sales and pound rises after UK inflation s

Global stock indices rose on Wednesday, helped by data showing that consumer spending in the United States hit a record high last month, while unexpected inflation figures in Britain confirmed the need for the Bank of England to raise interest rates.

Futures on the S&P 500 , Dow Jones and Nasdaq 100 rose, trading up about 0.1-0.3% for the day. The benchmark indices closed higher on Tuesday, boosted by gains in equities and in particular shares of technology companies. The rise came after retail sales data underlined the resilience of the US economy in October, even in the face of sharp inflation. 

According to Tuesday's Census Bureau data, retail sales rose 1.7% last month to a new record high of $638.2 billion from an upwardly revised $628 billion in September. That beat the average forecast of 1.1 per cent growth by economists surveyed by Bloomberg.

"That's all that says about weak consumer confidence signalling a slowdown in growth; what people do is far more important than what they say," said Pantheon Economics chief economist Ian Shepherdson.

"With a net revision of 0.4% in addition to October's results beating the consensus, this is a very strong report. We saw some upside risk to the consensus, but it's better than we dared to hope and it reduces consumption in the fourth quarter. to a very strong start," he added.

The dollar flew to a new 16-month high against a basket of major currencies, incited by rising anticipation over the timing of the Fed's first rate hike. 

But that eased slightly against the pound after data showed British inflation hit a 10-year high in October, helped by rising household energy prices. 

According to Vietnam Exness Broker, consumer prices rose 4.2% year-on-year in October, showing an increase from September's 3.1% rise and well above expectations of 3.9%.

This data confirms that the Bank of England raised interest rates for the first time in more than four years. At its last policy meeting it held back on rising rates despite sounding the alarm over rising price pressures. 

"Today's data is a huge embarrassment for the Bank of England, whose delay with a modest 0.15% rate hike earlier this month now gives the chance that all pre-Christmas headlines will be of the 'Bank of England steals Christmas' variety if they do bite the bullet and push rates higher as of late," said CMC Markets chief strategist Michael Hewson. 

Sterling rose 0.1% against the dollar, euro and yen , while two-year bond yields hovered around two-week highs of around 0.61%. 

On the equity side, the London FTSE 100 fell 0.3%. This made it one of the worst performing indices in Europe, compared with modest gains of 0.1% for Frankfurt's DAX and the broader Stoxx 600. 

In Asia, Chinese blue-chips closed higher, with the Shanghai Composite adding 0.4% and the Shenzen / Shanghai index adding 0.6%. Meanwhile, Tokyo's Nikkei lost 0.4% and South Korea's KOSPI fell 1.1%.

Cryptocurrencies came under pressure for a second day. Bitcoin briefly dipped below $59,000 and ether fell to $4,000. Both coins hit record highs this month, helped by the launch of exchange-traded funds and investor excitement about the rise of the meta universe - a digital world based on cryptocurrencies and non-interchangeable tokens. 

"Bitcoin and Etherium seem poised to end the year as one of the best performing assets, but if we see Wall Street getting nervous about a Fed policy mistake, cryptocurrencies will suffer," said OANDA strategist Ed Moya.

"Bitcoin's long-term prospects are still much higher, but short-term prospects are murky at best."

 

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