Global Markets Rebound Amid Mixed Economic Signals as U.S. CPI Data Stabilizes Inflation Fears

Markets rallied Friday as U.S. December CPI rose 3.1% year-over-year, in line with expectations, easing concerns over persistent inflation. Stock indices climbed, while Treasury yields dipped, signaling renewed confidence in monetary policy stability.

Global equity markets posted strong gains Friday, with the S&P 500 closing up 1.8% after the U.S. Department of Labor reported December consumer prices rose 3.1% annually, matching forecasts. The core CPI, excluding food and energy, increased 2.9%, also in line with consensus estimates, reinforcing expectations that the Federal Reserve will hold rates steady in early 2026. The yield on the 10-year U.S. Treasury fell to 4.12% from Thursday’s 4.27%, reflecting reduced demand for safe-haven assets amid improved inflation outlooks. Wall Street’s tech-heavy Nasdaq Composite surged 2.3%, led by a 4.7% jump in Nvidia (NVDA) shares following stronger-than-expected data center demand forecasts. European markets followed suit, with Germany’s DAX rising 1.6% and France’s CAC 40 gaining 1.4%. In Asia, Japan’s Nikkei 225 climbed 1.9% after the Bank of Japan maintained its ultra-loose policy stance, citing stable wage growth and subdued price pressures. The rebound came despite weaker-than-expected manufacturing data from China, where the Caixin Manufacturing PMI dropped to 49.5 in December, below the 50 threshold indicating contraction. However, investors appeared to downplay the development, focusing instead on the U.S. inflation data and signs of resilience in the global services sector. The move in equities and bonds underscored a shift in market sentiment, with the VIX volatility index dropping 12% to 15.8, the lowest level since October 2025. Analysts suggest that the stability in inflation metrics may pave the way for the first rate cut in June 2026, pending further labor and consumption data.