European stock markets opened higher on Thursday morning as investors await the release of US inflation data.
The FTSE 100 (^FTSE) was up 0.5% after a strong session which saw London’s bluechip index hit a two-year high on Wednesday close.
Meanwhile, investors will also look out for a speech by Bank of England (BoE) governor Andrew Bailey, who is due to peak at the CityUK dinner on Thursday night.
On Wednesday, the BoE’s chief economist Huw Pill backed a “steady handed approach” to raising rates.
The bank chief argued that with the situation as it is today, “a case can be made for a measured rather than activist approach to policy decisions.”
Elsewhere in Europe, France’s CAC (^FCHI) was up 0.5% after the opening bell and the DAX (^GDAXI) edged up 0.8% in Germany.
Read more: Bank of England’s chief economist urges caution over raising rates
Across the Atlantic, US stocks continued to their rally ending in the green for two consecutive days. Although, all three major benchmarks are up so far this week, they are in negative territory year to date.
The tech-heavy Nasdaq (^IXIC) led the solid session, jumping 2.1%. The index was largely pushed up by shares in Facebook-owner Meta (FB) $11.82 or 5.4% to $232ps. This was the largest percent increase in about 10 months, after a four-day decline wiped nearly a third of its market value.
Wall Street’s blue-chip S&P 500 (^GSPC) was up 65.64 points or 1.5% to 4587.18, while the Dow Jones (^DJI) edged 0.9% higher.
“Today’s US inflation report could well be the catalyst that determines whether the Nasdaq 100 breaks back above that key 200-day MA level in the next few hours,” said Michael Hewson, chief market analyst at CMC Markets. “The recovery of the January lows has been a roller-coaster one for US markets, with some wild intraday moves, and while we haven’t retested these lows, the key test this week is likely to be whether we are able to push through the highs of last week.”
Traders are awaiting fresh consumer price inflation (CPI) figures due on Thursday afternoon to give additional clues as to how quickly the Federal Reserve may raise interest rates after slashing them in 2020 to protect the US economy from the impact of the pandemic.
Analysts anticipate US CPI for January to rise to 7.2%, down from forecasts of 7.3% a week ago.
Read more: UK facing £76bn a year public spending crisis
The 10-year US treasury yield (^TNX) retreated from levels last seen in July 2019, ticking down to session lows of 1.90% on Wednesday from a high of 1.97% on Tuesday. Yields move opposite to prices.
A more hawkish Fed could hurt tech firms as they tend to benefit from low bond yields as some investors are willing to pay more for shares that they anticipate could turn out more profit in the future.
Hewson added: “This week’s rise in US yields in the aftermath of last Friday’s payrolls report, would appear to suggest that bond markets have already made up their minds about today’s January CPI number, and that it is expected to be a strong number.
“The strength of last week’s payrolls numbers has certainly shifted thinking towards the possibility of a 50bps rate move by the Fed in March, with a strong CPI number today only serving to reinforce that narrative.”
Overseas, the pan continental Stoxx Europe 600 (^STOXX) gained over 1.7%.
Asian markets also rallied as they tried to scale rising tension between Russia and Ukraine, US inflation and the impact of COVID amid rising cases.
The Shanghai Composite (000001.SS) was up 0.2%. The Hang Seng (^HSI) was 0.4 higher while the Nikkei (^N225) advanced over 0.4% in Japan.
Watch: What is inflation and why is it important?
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