The stock and bond markets saw a surge of activity this week after news of October CPI (consumer price index) was announced. The CPI rose 0.9% last month, the sharpest gain since April, indicating that consumer prices are rising after months of deflation.
The inflation rate, which measures how much prices have risen for basic goods and services, also increased to 1.4%, the highest increase since April.
The news appears to have been welcomed on Wall Street, with stocks and bonds rallying in the wake of the announcement. In the US, the Dow Jones Industrial Average rose 1.8%. The S&P 500 was up 1.6% and the Nasdaq rose 1.4%.
In Europe, the main indices all made gains, with the FTSE 100 rising 1.7%, the German DAX increasing by 1.9% and the French CAC 40 gaining 2.2%.
The positive sentiment in the markets could be attributed to the assumption that the increased inflation could help stimulate economic growth as more people have money to spend.
In turn, this could lead to increased corporate profits for companies which in turn could lead to higher stock prices. The bond market also reacted positively to the news with yields rising on government bonds as investors bet that the inflation rate could soon start to increase.
In the end, the stock and bond markets seem to be responding favorably to the news of increased inflation in October. This could signify a return to economic growth in the near future as consumer spending picks up.