US stocks jumped on Tuesday morning despite data released today showing inflation in America rose at its fastest pace for 13 years.
The blue-chip S&P 500 and the Nasdaq both hit record highs during the morning open, rising 0.12 per cent and 0.44 per cent respectively.
Growth stocks helped to lift the indexes as they were boosted by the US 10-year Treasury yield dipping after investors poured into safe haven assets following the release of the inflation data.
Positive earnings reports from banking powerhouses JPMorgan and Goldman Sachs also kicked off another earnings season positively.
Read more: JPMorgan profits surge 155 per cent
Data published this morning shows US annual consumer prices rose 5.4 per cent, their fastest pace since August 2008, while the core-CPI soared 4.5 per cent, its largest increase since November 1991.
Fears that the Federal Reserve will wind down its ultra-loose monetary policy stance sooner than expected are mounting, causing investor sentiment to sour.
‘The real question that is on everyone’s minds is how long these hot inflation numbers will last,” said Mike Loewengart, managing director of investment strategy at E*TRADE Financial.
“Every successive high inflation read will make it harder and harder for the Federal Reserve to remain accommodative.”
Banking powerhouses pare back gains to drag down FTSE 100
London’s FTSE 100 dipped on Tuesday, driven by sharp losses among banking heavyweights despite the Bank of England allowing them to resume normal dividends and share buybacks.
The capital’s premier index dipped to 7,124 in the afternoon session.
The fall reversed a morning surge which saw banking stocks rally after the Bank of England ruled they can resume normal distribution processes to shareholders.
“UK banks aren’t U.S. banks and anyone expecting a big increase in payouts needs to temper their optimism, which probably helps explain why, despite an initial move higher, the bulk of, if not all of, today’s gains have disappeared” said Michael Hewson, senior market analyst at CMC Markets.
The mid-cap FTSE 250 was up slightly by 0.14 per cent, while AIM shares gained 0.06 per cent during the afternoon session.
The pound was broadly flat against the dollar to buy $1.38.
Winners and losers
The day’s biggest winner was miner Fresnillo, climbing 3.11 per cent.
Ashtead Group, the industrial equipment rental company, came second, adding 1.93 per cent. Business services company Rentokil came third, up 1.76 per cent.
Bank NatWest was the day’s worst performer, sliding 2.61 per cent, despite the Bank of England’s Financial Policy Committee giving the company’s capital buffers a clean bill of health.
British Airways parent company IAG was the second worst performer today, losing 2.25 per cent. Engine maker Rolls Royce came third, down 2.22 per cent.
Around the world
London’s poor performance was not reflected in Asian shares, with the region’s benchmarks up today.
Japan’s Nikkei added 0.52 per cent, while Hong Kong’s Hang Seng climbed 1.63 per cent.
European shares were muted, with the Stoxx 600 up 0.02 per cent.