NEW YORK: Despite fresh data showing the persistence of inflation, European stocks advanced following a better-than-expected GDP report, while Wall Street stock were boosted by solid earnings from Amazon, ExxonMobil and others.
The EU’s official data agency said the 19-country eurozone’s economy grew by 0.7 percent in the second quarter, far stronger than expected by analysts.
While Eurostat data also showed that inflation in the single-currency area hit yet another new record of 8.9 percent in July, markets were cheered by the growth figure.
Frankfurt rose 1.5 percent and Paris climbed 1.7 percent.
Countries reliant on tourism showed better-than-expected resilience, with growth in France and Spain gaining strength as visitors took advantage of unrestricted travel to the world’s top destinations.
Nevertheless, analysts warned that the tourism boost would be short-lived and said all countries faced a huge challenge to sustain growth in the second half of the year.
“The stronger-than-expected GDP data... do not alter the fact that a deepening energy crisis, soaring inflation and rising interest rates are likely to push the region into recession later this year,” said Andrew Kenningham, economist at Capital Economics.
Wall Street stocks, meanwhile, rallied for a third straight day.
The broad-based S&P 500 finished at 4,130.29, up 1.4 percent for the day and 4.3 percent for the week.
Investors shrugged off the latest indicator of US inflation, as government data showed the personal consumption expenditures price index jumped 1.0 percent in June compared to May, outpacing income gains, which rose just 0.6 percent.
Stocks have risen the last three days, digesting the Federal Reserve’s second straight 75 basis point increase and negative GDP data suggesting a heightened risk of a US recession.
“The Fed has a clear path to continue with aggressive hikes, but many are still thinking they’ll be inclined to go at only a half point in September,” said Oanda’s Edward Moya.
Investors were cheered by several better-than-expected earnings reports that led to outsized gains by some of the world’s biggest companies.
Amazon surged 10.4 percent after impressing analysts with strong online sales and a good performance in its web services business.
Apple also climbed, winning 3.3 percent after reporting better-than-expected results on continued strength of iPhones.
ExxonMobil jumped 4.6 percent and Chevron soared 8.9 percent after both companies reported quarterly earnings records on the rise in energy prices following the Russian invasion of Ukraine.
Market analyst Michael Hewson at CMC Markets said investors are “taking comfort from earnings numbers that have by and large been better than expected, despite concerns about the growth outlook.”
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