US markets point higher on more gloomy inflation news

NEW YORK — Wall Street spiked higher before the opening bell on Friday and the major indexes are on course for their first consecutive weekly gains in four months despite a seemingly endless string of data that points to rising inflation.

Futures for the S&P 500 gained 0.4% and futures for Dow Jones Industrials rose 0.1%, although both pulled back from higher levels after inflation data more surprising in the United States.

The government said an inflation indicator closely monitored by the Federal Reserve jumped 6.8% in June from a year ago, the biggest increase in four decades.

Friday’s figures from the Commerce Department underscored the persistence of inflation that is eroding Americans’ purchasing power and undermining their confidence in the economy.

This is a worrying trend, as consumer spending is the main driver of the US economy and has been among the few bright spots when it comes to economic indicators.

Consumers appear to be holding their own, with data released on Friday showing spending managed to outpace inflation, rising 0.1% from May to June after adjusting for price changes.

Wall Street appears to believe the Federal Reserve may be tempering its aggressive interest rate hikes aimed at tackling inflation after the Commerce Department reported the U.S. economy contracted at an annual rate of 0.9% in the last trimester. This follows a 1.6% year-on-year decline in the first quarter.

Consecutive quarters of falling GDP are an informal, but not definitive, indicator of what economists call a technical recession.

Stocks in Europe were significantly higher at midday, despite a report that inflation in countries using the euro hit a new high this month. Annual inflation in the 19 euro zone countries reached 8.9% in July, against 8.6% in June, according to figures published on Friday by the European Union statistics agency.

Energy prices jumped almost 40%, fueled by Russia’s war in Ukraine, but the economy still managed better-than-expected, albeit weak, growth of 0.7% in the second trimester.

The growth comes even as Germany, Europe’s traditional economic engine, stagnated in the April-June quarter, adding to fears it was on the brink of recession. Worries about energy supplies are at the center of worries about the outlook for the economy, which like many others is suffering from high inflation.

In a bid to stem rising prices, the European Central Bank raised interest rates last week for the first time in 11 years.

At midday Friday in Europe, the German DAX gained 1.2%, while the French CAC 40 rose 1.6%. Britain’s FTSE 100 gained 0.5%.

In Asia, investors were cautiously watching regional tensions after President Joe Biden and China’s Xi Jinping spoke for more than two hours on Thursday. China has left no doubt that it blames the United States for deteriorating relations, but the White House said the purpose of the call was to “responsibly manage our differences and working together where our interests align”.

Hong Kong’s Hang Seng Index fell 2.4% to 20,156.51 and the Shanghai Composite Index fell 0.9% to 3,253.24 after Chinese leaders said after a meeting of planning that the country would stick to a zero COVID policy which has disrupted manufacturing and other business activities. It underscores the high cost Xi’s government is willing to incur to stop the virus in a politically sensitive year when it is widely expected to try to extend its term.

Japan’s benchmark Nikkei 225 fell less than 0.1% to end at 27,801.64, while Australia’s S&P/ASX 200 gained 0.8% to 6,945.20. The South Korean Kospi added 0.7% to 2,451.50.

Japanese government data showed factory output in June jumped 8.9% from the previous month, marking the first rise in three months. The recent easing of pandemic lockdowns in China has helped boost Japanese production.

In other trading, benchmark U.S. crude gained $2.08 to $98.50 a barrel in electronic trading on the New York Mercantile Exchange. It lost 84 cents to $96.42 on Thursday.

Brent crude, the international price standard, gained $2.19 to $104.02 a barrel.

Oil companies have made record profits in recent months, at a time when Americans have struggled to afford gasoline, food and other basic necessities.

On Friday, Exxon Mobil reported a record $17.85 billion profit for the second quarter and Chevron made a record $11.62 billion. The sky-high profits come a day after UK-based Shell broke its own profit record. Shares of Exxon and Chevron each rose more than 3% before the bell on Friday.

In currency trading, the US dollar fell to 133.78 Japanese yen from 134.27 yen on Thursday evening. The euro traded at $1.0198 against $1.0199.

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