Global stocks slipped on Friday after robust U.S. and German economic data bolstered prospects of interest rates staying higher for longer on both sides of the Atlantic.
Premier Miton Investors chief investment officer Neil Birrell said stock markets could enter a tug of war between strong economic growth and sustainably high interest rates reducing appetite for equities over fixed-income bonds. “Earnings are strong but the bar for the sort of upside surprise needed to push markets higher is rising,” he said.
The European Central Bank has all but committed a rate cut in June but its policymakers have warned further easing may not be warranted because they expect inflation, which has moderated substantially, to hover above their 2 per cent target until 2025. The U.S. currency has gained about 0.5 per cent against the euro this week and about 1 per cent against the Japanese yen, which has weakened severely in recent months to 157 per dollar as the Bank of Japan kept monetary policy loose. Data on Friday showed core inflation in Japan slowed for a second straight month in April, remaining above the central bank’s 2 per cent target but also signalling the BoJ would remain cautious about raising rates as consumer spending stays fragile.
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