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Late at night, U.S. stocks surged.

The latest PCE data from the United States was released. As "the inflation indicator that the Federal Reserve pays the most attention to", the data basically met expectations.Thirty-day federal funds rate futures show a sharp increase in the likelihood that the Federal Reserve will cut interest rates by 50 basis points in September, according to the Chicago Mercantile Exchange's FedWatch tool.

After the news came out, U.S. stocks collectively soared. By the close of trading, the three major stock indexes all rose by more than 1%.

Popular Chinese stocks generally rose, with Xpeng Motors and NIO rising more than 3%, Bilibili rising more than 2%, Alibaba, Futu Holdings, and Baidu rising more than 1%, and JD.com, Pinduoduo, Vipshop, iQiyi, and Weibo rising slightly.

Gold and silver also reversed the downward trend of the previous few days and rose strongly.

In Europe, major European stock indices closed higher. Germany's DAX30 index rose 0.68%, with a cumulative increase of more than 1.4% this week; Britain's FTSE 100 index rose 1.27%, with a cumulative increase of more than 1.5% this week; France's CAC40 index rose 1.22%, with a cumulative decrease of about 0.2% this week; and Europe's STOXX 50 index rose 1.03%, with a cumulative increase of about 0.7%.

The United States has another important data release

The so-called core personal consumption expenditures price index (PCE) in the United States, which excludes volatile food and energy items, rose 2.6% year-on-year in June, compared with an expected 2.5% and the previous value of 2.6%. The core PCE price index rose 0.2% month-on-month in June, compared with an expected increase of 0.2%.

As "the inflation indicator that the Federal Reserve pays the most attention to", the data basically met expectations.

In response, the U.S. Commerce Department's Bureau of Economic Analysis said on Friday that overall, price pressures are fading, which may help Federal Reserve officials who meet next week to increase their confidence that inflation is moving toward their 2% target.

Analyst Cameron Crise said that the U.S. PCE price index was roughly in line with expectations, although as mentioned earlier, after some revisions, the year-on-year change in the core data was slightly higher than expected. Given the market's consensus forecast, the new level of the core index was also slightly higher than expected. The core service spending data excluding housing was not as mild as its counterpart in the CPI report, rising 0.19% month-on-month. The corresponding data for the previous month was revised up from 0.1% to 0.18%. These data are not enough to prevent the Fed from cutting interest rates in September, but there is no sign that the Fed needs to cut interest rates early or by more than 25 basis points. The bond market may be reacting to weaker income/spending data, as the inflation data does not seem to be strong enough to support any rebound.

How many times will interest rates be cut this year?

Economists at Bank of America expect the Federal Reserve to keep its policy rate unchanged in July while signaling that progress has resumed in reducing inflation.

The Fed is optimistic about the chances of a near-term rate cut but is unlikely to signal a September cut is a done deal, the bank's economists said in a note.

Bank of America still believes that the Federal Reserve will cut interest rates once in December this year, and is not too worried about the risk of a sharp economic slowdown. Economists said, "We think the market has begun to be too optimistic about the upcoming rate cut cycle."

However, they also acknowledged that a September rate cut is now closer to their baseline expectations. "A dovish Fed, a weak July jobs report, or a return of inflation data similar to June could change our thinking," they said. On the other hand, a strong July jobs report and uneven inflation data, combined with above-consensus second-quarter GDP data, could lead the Fed to delay a rate cut until after September.

Editor: Peng Bo

Proofreader: Peng Qihua