US Stocks Soar Despite Solidifying Rate Hike Expectations

US inflation data has solidified expectations of a Federal Reserve interest rate hike next week. Despite this, US stocks soared on Friday, with the Dow Jones Industrial Average increasing by 1.0% and the S&P 500 rising by 1.1%. The Nasdaq Composite surged by 1.3%, while European indices also rose.

The FTSE 100 index in London closed up 41.52 points at 10,650.44, with the AIM all-share climbing 2.92 points to 790.87. However, the large-cap benchmark has fallen 1.7% over the past week, marking its worst performance since July.

Analysts at Barclays maintained their call for a 25bp hike at next week's Federal Open Market Committee meeting, stating that some of the August inflation strength 'seems one-off', but the data is still supportive of a rate increase. Oxford Economics analyst Bernard Yaros expressed caution, noting that while core CPI growth was hotter-than-expected, the Fed's preferred inflation measure may prove more benign.