Stocks continue recovery despite inflation increase

Today’s PPI has done little to dent market confidence, with stocks moving gradually higher as the recovery continues.

  • FTSE in the green, as rebound goes on
  • Rise in PPI and CPI fails to dent tentative confidence of market bottom
  • Fresnillo heads up FTSE despite rise in inflation

The FTSE has enjoyed another relatively stable session, as the gradual recovery continues to take shape. While last week saw US volatility spike off the back of higher inflation expectations, we are seeing that volatility calm down considerably this week. With US stocks higher despite yesterday’s rise in US CPI and today’s PPI increase, there is clearly a reduced sensitivity in markets, with the yesterday’s initial stock sell-off subsequently turning into gains. That disregard for rising inflation could provide us with a clue that the recent episode is nearing an end, with the weakness seen in the latter park of today’s session unlikely to damage the bullish story being built over recent
 days.

The FTSE 100 is being headed up by gold producer Fresnillo, which is catching a lift off the back of a spike in the precious metal this afternoon. Havens have been moving in tandem with stocks over the past fortnight, with the typical risk-on, risk-off relationships giving way to the impact of rising inflation and bond yields. While we have seen CPI and PPI inflation rise this week, the fact that we are seeing a more muted response from markets is a positive, with gold rising rather than falling as was seen in the wake of the average earnings data.

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