Global stocks climb to 18-month low, but markets watch for recession

  • S&P futures up 1.13%, European stocks gain 0.96%
  • MSCI Asia excluding Japan +1.8%, Nikkei +2.64%
  • Concerns about inflation and policy tightening remain
  • Dollar swings near 20-year highs on safe-haven demand

LONDON/SHANGHAI, May 13 (Reuters) – Global stocks rose from 18-month lows a day earlier and the dollar fell from 20-year highs on Friday, although investors remained worried about high inflation and the impact of rising interest rates.

Markets are worried about the possibility of a recession, with the S&P approaching a bear market on Thursday, nearly 20% off its all-time high in January.

In an interview late Thursday, US Federal Reserve Chairman Jerome Powell said the battle to control inflation “would include some pain.” Powell reiterated his expectation of a half percentage point interest rate hike at each of the Fed’s next two policy meetings, while promising that “we are ready to do more.” Read more

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The war in Ukraine has added to supply chain disruptions and inflationary pressures already in place after more than two years of the COVID-19 pandemic, but stocks rebounded on Friday.

“There’s an awful lot of negative sentiment out there, we’re looking at a 40% probability of a recession,” said Patrick Spencer, vice president of equities at Baird Investment Bank.

“Many fund managers have reduced their equity allocations and raised cash, although we believe this is a correction rather than a bear market.”

The MSCI World Stock Index (.MIWD00000PUS) rose 0.32% after hitting its lowest level since November 2020 on Thursday, although it was heading for a 4% decline on the week, its sixth consecutive week of decline. losses.

S&P futures rebounded 1.13% after the S&P index fell 0.13% overnight, with the index also eyeing a sixth consecutive week of declines.

S&P 500 braces for sixth consecutive week of falls

European stocks (.STOXX) rebounded 0.96% and Britain’s FTSE 100 (.FTSE) gained 1.17%.

The US dollar fell 0.22% to 104.54 against a basket of currencies, but remained near 20-year highs on safe-haven demand.

Russia has bristled at Finland’s plan to seek NATO membership, with Sweden potentially following suit.

Moscow called Finland’s announcement hostile and threatened retaliation, including unspecified “military-technical” measures. Read more

The dollar rose 0.36% to 128.76 yen, while the euro gained 0.3% to $1.0408, recovering from Thursday’s five-year lows.

The cryptocurrency bitcoin also rose, hitting $30,000 after the collapse of TerraUSD, a so-called stablecoin, took it to a 16-month low of around $25,400 on Thursday. Read more

“Some traders may see this month’s sharp fall as an opportunity to buy the dip, but given the extremely volatile nature of the coins, the crypto house of cards could still collapse,” said analyst Susannah Streeter. Head of Investments and Markets at Hargreaves Lansdown. .

The upward moves in equities were mirrored in US Treasuries, with the benchmark US 10-year yield hitting 2.9221% from a close of 2.817% on Thursday.

The policy-sensitive 2-year yield was 2.6006%, up from a close of 2.522%.

“In the shape of the US Treasury curve, we don’t see any particularly fresh recession/downturn signal, just the same sharp and consistent downturn predicted for the second half of 2023,” said Alan Ruskin, macro strategist at Deutsche Bank, in a note.

Yields on 10-year German government bonds rose slightly to 0.9250%.

MSCI’s broadest Asia-Pacific ex-Japan equity index (.MIAPJ0000PUS) rose nearly 2% from Thursday’s 22-month closing low, cutting its losses for the week to less than 3%.

Australian stocks (.AXJO) gained 1.93%, while Japan’s Nikkei stock index (.N225) jumped 2.64%.

In China, the blue-chip CSI300 index (.CSI300) rose 0.75% and Hong Kong’s Hang Seng (.HSI) rose 2.71%, buoyed by comments from the deputy mayor from Shanghai that the city may start easing some strict COVID restrictions this month. Read more

“We had some pretty big moves yesterday, and when you see those big moves, it’s only natural to have a retracement, especially since it’s Friday before the weekend. not really a new narrative,” said Matt Simpson, senior market analyst at City Index.

Oil prices were higher amid an impending European Union ban on Russian oil, but were still set for their first weekly loss in three weeks, hit by concerns over inflation and lockdowns. China that are slowing global growth.

U.S. crude rose 0.75% to $106.97 a barrel, and global benchmark Brent crude rose 1.05% to $108.58 a barrel.

Spot gold, which had hit a three-month low on the strength of the dollar, rose 0.2% to $1,824.61 an ounce.

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Reporting by Andrew Galbraith; Editing by Simon Cameron-Moore, Lincoln Feast and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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