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Stocks jump as US consumers keep spending

·4-min read

Stocks soared Friday after the latest data showed that US consumers continue to spend more in the latest signal of the strength of the economy despite high inflation and rising interest rates.

Better-than-expected results from Citigroup also helped allay somewhat concerns about what waits in store for investors as companies begin to report their next quarterly results.

The euro held above $1.00, having sunk below parity this week on fears Russia would cut off Europe's gas supplies in retaliation for Ukraine war sanctions, pushing the region into recession.

Oil prices rebounded having slumped Thursday on renewed fears of a global recession that would dent demand for energy.

Wall Street pushed higher on a better-than-expected 1.0 percent rise in retail sales in June.

While not adjusted for inflation, sales were still up 0.7 percent even when gasoline was removed from the calculation, according to the Commerce Department data.

"This could be good news for US GDP which suggests that the economy may well avoid a contraction in (the second quarter), and ergo a technical recession," said analyst Michael Hewson at CMC Markets.

The figure was also looked at through the prism of how it might affect the US Federal Reserve's decision later this month on raising interest rates, with the solid growth giving policymakers licence to hike rates more aggressively.

"The key takeaway from the report is that it was strong enough to keep concerns about weakening consumer spending at bay for the time being," said analysts at Briefing.com.

Markets had taken a major knock this week from news that US inflation zoomed to a 40-year high of 9.1 percent in June on energy costs.

After rate hikes by several countries, investors now expect the Federal Reserve to lift rates later this month by 75 basis points as officials battle decades-high inflation, though some observers suggest a one-percentage-point move could even be on the cards.

While experts warn that raising US rates risks hammering the economy, the Fed has made it clear the number-one priority is bringing down prices.

The retail sales figures join other data showing that the US economy is holding up relatively well so far despite high inflation and rising interest rates.

Meanwhile, Citigroup's net profits fell by 25 percent to $4.5 billion, yet earnings per share easily beat expectations. The banking group took in more revenue and benefited from rising interest rates.

Citigroup shares jumped more than 10 percent.

Wall Street stumbled Thursday with sentiment weighed down by disappointing reports from JPMorgan Chase & Co. and Morgan Stanley.

Those compounded worries that company profits would be hit by the fallout from a number of issues including rocketing consumer prices, monetary policy tightening and the war in Ukraine.

European stocks finished the day sharply higher.

In Asia, Hong Kong and mainland Chinese equity markets led losses after data showed China's economy grew just 0.4 percent in the second quarter, battered by Covid lockdowns in major cities including Shanghai and Beijing.

The reading was well off the 1.6-percent growth predicted by analysts in an AFP survey.

Elsewhere, traders are keeping tabs on US President Joe Biden's visit to the Middle East as he tries to persuade Saudi Arabia to bring down high oil prices by pumping more crude.

- Key figures at around 1530 GMT -

New York - Dow: UP 1.9 percent at 31,225.63 points

EURO STOXX 50: UP 2.4 percent at 3,477.20

London - FTSE 100: UP 1.7 percent at 7,159.01 (close)

Frankfurt - DAX: UP 2.8 percent at 12,864.72 (close)

Paris - CAC 40: UP 2.0 percent at 6,036.00 (close)

Tokyo - Nikkei 225: UP 0.5 percent at 26,788.47 (close)

Hong Kong - Hang Seng Index: DOWN 2.2 percent at 20,297.72 (close)

Shanghai - Composite: DOWN 1.6 percent at 3,228.06 (close)

Euro/dollar: UP at $1.0098 from $1.0022 Thursday

Pound/dollar: UP at $1.1863 from $1.1826

Euro/pound: UP at 85.07 pence from 84.72 pence

Dollar/yen: DOWN at 138.53 yen from 138.93 yen

West Texas Intermediate: UP 2.9 percent at $98.53 per barrel

Brent North Sea crude: UP 2.8 percent at $101.90 per barrel

burs-rl/bp

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