Stock markets rise encouraged by lower inflation data, the yen advances

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Global stock markets hit one-month highs on Friday on signs inflation was slowing, while the yen jumped to seven-month highs and Japanese bond yields beat the central bank’s target as investors tested their commitment to their expansionary monetary policy.

European stocks opened higher and the index STOXX 600 hit their highest since April, while Japan-exclusive Asia-Pacific stocks hit a new seven-month high and headed for a third straight week of gains.

U.S. stock futures pointed to a lower opening on Wall Street, but overall sentiment was upbeat a day after data showed U.S. price pressures continue to ease.

Japan grabbed market attention as the yen soared and the yield on 10-year government bonds exceeded the 0.5% ceiling set by the Bank of Japan, amid speculation that its yield curve control policy could be revised, or even abandoned, as soon as next week’s monetary policy meeting.

The yen appreciated to 128.11 per dollar, its highest level since late May, before trading up 0.8 percent. The yen has risen 6% in just over three weeks since the Bank of Japan surprised markets by widening the band around its target for 10-year government bond yields.

Beyond Japan, market sentiment was dominated by December U.S. inflation data, which was roughly in line with expectations. The annual pace of consumer price growth slowed to 6.5% in December from 7.1% in November.

Investors responded by shifting U.S. interest rate expectations downwards. The Federal Reserve is now forecast to hike 25 basis points instead of 50 next month, while futures markets forecast rate cuts by the end of the year.

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Against this backdrop, the MSCI index of world equities hit a one-month high in and was poised for its biggest weekly rally in two months.

The yield on the 10-year U.S. Treasury note fell to 3.418%, its lowest level since Dec. 7.

The euro rose to a nine-month high of $1.0868 and the risk-sensitive Australian dollar climbed to a near five-month high of $0.6994.

The petroleum He advanced favored by optimism about the reopening of China and the futures of the Brent crude They rose 0.4 percent to $84.33.

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