Global Markets Rally on Softer Inflation Signals

European stocks rose on Wednesday, and the dollar hovered near a one-week low after softer inflation data helped markets rebound from last week's downturn. Traders were optimistic that upcoming U.S. inflation data would also be favorable. New Zealand's central bank reduced interest rates for the first time in four years, causing a 1% drop in the Kiwi dollar.

The Japanese yen and Nikkei showed volatility following Prime Minister Fumio Kishida’s announcement of his impending resignation, yet Asian shares rose overall. By 1041 GMT, the MSCI World Equity index increased by 0.3%, marking its highest point in 12 days.

Wall Street futures were slightly higher, with S&P 500 and Nasdaq futures up by 0.1%. Europe's STOXX 600 climbed by 0.3%, and London's FTSE 100 rose 0.4% after British inflation data came in lower than expected for July. UBS shares surged 3.1% as the bank reported $1.1 billion in net profit, surpassing analyst expectations.

Global markets were earlier shaken by recession fears in the U.S., leading to expectations of swift Federal Reserve rate cuts. However, recent U.S. data has softened recession concerns, with stocks rising on Tuesday after producer price data indicated cooling inflation. U.S. CPI data expected later may bolster hope for Fed rate cuts, with markets pricing in high chances for upcoming rate reductions.

“Markets are less in panic mode,” said Justin Onuekwusi, chief investment officer at St. James's Place. He cautioned against overly optimistic rate cut expectations, especially with Fed officials like Atlanta Federal Reserve President Raphael Bostic emphasizing the need for more supportive data.

The 10-year U.S. Treasury yield dipped slightly to 3.8333%, and European bond yields rose marginally. The dollar index remained stable at 102.46, while the euro hit its strongest level since January 2. Brent crude futures and U.S. West Texas Intermediate crude fell slightly, whereas gold prices climbed by 0.4%.

(With inputs from agencies.)