Stock markets rally, as euro briefly surges

Stock markets rallied yesterday, building on pre-weekend momentum as investors priced in the expectation of further interest rate hikes aimed at taming decades-high inflation.

The euro surged against main rivals, a day after German central bank chief Joachim Nagel signalled that the European Central Bank (ECB) would probably continue raising its key rate.

The European single currency rocketed more than 1.4 per cent against the dollar and 1.6 per cent versus the yen before trimming gains around midday.

The ECB raised the key rate by a historic 75 basis points last week, and markets expect a similar-sized hike at an October meeting.

Paris and Frankfurt stock markets rose by more than two per cent in mid-afternoon trading, with London not far behind as data showed the British economy rebounded slightly in July.

Tokyo closed with a gain of more than one percent thanks to a weaker yen. Markets in Hong Kong, mainland China and South Korea were closed for a public holiday.

Investors worldwide are awaiting key US inflation data for August, due September 13, with the consumer price index (CPI) expected to ease slightly to eight per cent − still well above the Fed’s two per cent...