Written by Tom Westbrook and Sam Byford
SINGAPORE/TOkyo (Reuters) – Global stocks and bonds headed for their first weekly gain in a month on Friday, as growth concerns were calmed by hopes that low commodity prices could help rein in hyperinflation.
MSCI’s broadest index of Asia Pacific shares outside Japan rose 1.4% on Friday, with the help of short sellers bailing out from Ali Baba (NYSE 🙂 – up nearly 7% – amid hints that China’s crackdown on technology is ebbing.
It rose 1.2% to post a weekly gain of 2%, while it extended overnight gains by 0.76%. EuroSTOXX 50 futures are up 1% and futures are up 0.6%.
The week was marked by sharp drops in commodity prices due to concerns that the global economy looks shaky and that higher interest rates will hurt growth – which in turn is also prompting traders to scale back some bets on the scale of rate hikes.
the leader for economic output with a wide range of industrial and construction uses, is heading for its biggest weekly decline since March 2020. It fell in Shanghai on Friday and fell about 8% over the week.
Oil is also heading towards a weekly loss. Futures fell 2.5% for the week to $110.35 a barrel, while benchmark grain prices were down with Chicago wheat down more than 8% for the week. [O/R][GRA/]
The declines led to some relief in equities because energy and food were the drivers of inflation. After recent heavy losses, the MSCI global stock index is up 2.3% this week, marking its first weekly gain since May.
“While market concerns about a sudden slowdown are behind recent moves in lower raw material prices, lower commodity prices feel they may be just what the doctor ordered for the global economy,” said Brian Dangerfield, markets strategist at NatWest.
“A lot of our concerns about a hard landing are related to commodity price concerns.”
Soft data this week is the reason.
Gauges of factory activity fell in Japan, Britain, the eurozone and the United States in June, as US producers reported their first direct drop in new orders in two years in the face of waning confidence.
Bonds rallied strongly on hopes that bets on big rate hikes should be scaled back, with two-year bond yields dropping 26 basis points on Thursday in their biggest drop since 2008. [GVD/EUR]
The benchmark index fell 7 basis points on Thursday and settled at 3.0908%. [US/]
The US dollar has fallen from recent highs, but not far away as investors remain cautious. It last settled at 1.05395 dollars per euro and bought 134.73 yen. [FRX/]
The faltering yen stabilized this week and drew little support on Friday from Japanese inflation that exceeded the Bank of Japan’s 2% target for the second month in a row, adding to pressure on its ultra-easy stance on policy.
Speakers at the European Central Bank and Federal Reserve will be closely watched later in the day, as will UK retail sales data and German business confidence. Moreover, the main concern is what all this means for the company’s performance.
“The second-quarter earnings reports will send shock waves to the market as the earnings outlook has not deteriorated materially yet, and that will heighten fears of a recession,” said Charu Chanana, market analyst at Singapore-based brokerage Saxo.