WALL Street stocks closed higher yesterday, with investors increasingly optimistic that the US Federal Reserve would soon end its cycle of interest rate hikes, while London equities jumped as UK inflation slowed.

Equities have been on a tear since data last week showed US inflation was continuing to fall towards the Fed’s target of 2%.

Other indicators have pointed to a US economy that was slowing but still in good health, sparking hope that the central bank is close to ending its rate-hike campaign without having sparked a recession.

Investors expect the Fed to raise interest rates at its policy meeting next week but then hold them there.

Reassuring corporate earnings reports have also helped drive stocks higher, with the Dow Jones Industrial Average logging its eighth straight day of gains.

“Earnings season continues to deliver the good news that the Dow has been looking for… The index has soared in recent sessions thanks to good earnings from banks and others outside of the tech bubble,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“A solid earnings season will drag more money back into stocks, supporting a rally over the summer and beyond,” he added.

Major banks including Morgan Stanley and Bank of America have seen their share prices increase after beating expectations.

Although Goldman Sachs reported a 62% drop in second-quarter profits on low merger activity, its shares ended 1% higher yesterday after executives added an improvement could be near.

Meanwhile, London surged 1.8% on data showing UK annual inflation dropped under 8% last month.

“Investors are taking the view that if inflation is on a sustained downward path, then the Bank of England might be less eager to keep pushing up interest rates,” Danni Hewson, head of financial analysis at AJ Bell, said following the British update.

“The market is desperate for that pivot moment where central banks call the end to the current rate-rise cycle.”

With analysts expecting the Bank of England to hike less aggressively in the coming months than previously thought, the pound slumped yesterday versus the dollar and euro.

“Inflation is now much lower than at the start of the year, but June’s (inflation) reading is still considerably higher than the Bank of England’s 2% target,” Hewson said, adding that further rate hikes cannot be ruled out.

Elsewhere, oil prices ticked down despite supply concerns.

Key figures around 2030 GMT

New York - Dow: UP 0.3% at 35,061.21 (close)

New York - S&P 500: UP 0.2% at 4,565.72 (close)

New York - Nasdaq: FLAT at 14,358.02 (close)

London - FTSE 100: UP 1.8% at 7,588.20 (close)

Frankfurt - DAX: DOWN 0.1% at 16,108.93 (close)

Paris - CAC 40: UP 0.1% at 7,326.94 (close)

EURO STOXX 50: DOWN 0.2 at 4,362.28 (close)

Tokyo - Nikkei 225: UP 1.2% at 32,896.03 (close)

Hong Kong - Hang Seng Index: DOWN 0.3% at 18,952.31 (close)

Shanghai - Composite: FLAT at 3,198.84 (close)

Pound/dollar: DOWN at US$1.2937 from US$1.3040

Euro/pound: UP at 86.59 pence from 86.13 pence

Euro/dollar: DOWN at US$1.1204 from US$1.1235 on Tuesday

Dollar/yen: UP at ¥139.71 from ¥138.87

Brent North Sea crude: DOWN 0.2% at US$79.46 per barrel

West Texas Intermediate: DOWN 0.5% at US$75.35 per barrel – AFP, July 20, 2023.