Reuters: Global markets gained on Friday, on track for their best month since late 2020, as euro zone growth topped forecasts. The dollar recovered from the day’s lows as traders awaited fresh U.S. data for rate indications.
As inflation rises in key nations and central bankers strive to hike rates without destroying GDP, riskier assets like stocks react favourably to any perceived policymaker softness.
After Thursday’s statistics showed a second-quarter U.S. economic contraction, equities climbed as speculators gambled rates would rise more slowly. Friday’s Euro zone data topped expectations, but recession fears are rising as oil inflation bites amid the Ukraine conflict.
The MSCI World index was recently up 0.2%, on track for its greatest monthly gain since November 2020, bolstered by broad advances across European markets, with the STOXX Europe 600 up 0.9%.
S&P 500 and Nasdaq futures are up 0.7% and 1.1%, respectively, with all eyes on wages and consumer price data for economic cues.
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said investors should be cautious.
“Near term, we expect broad equity indexes to have muted risk-reward. Equities are pricing in a’soft landing,’ but economic activity could’slump’ further.”
Asian financial markets were worried when Beijing removed its full-year GDP growth target at a Communist Party conference.
MSCI’s broadest Asia-Pacific index lost 0.4%.
The news that U.S. GDP shrank 0.9% last quarter and 1.6% the quarter before dragged on bond yields and the dollar, but both recovered on Friday.
The yield on benchmark 10-year Treasury notes recovered from overnight lows to 2.7229 percent, while the two-year note’s yield was 2.8885 percent.
The dollar was flat against its major counterparts, but on track for a second month of gains.
Futures markets forecast U.S. interest rates will peak in December compared to June 2023, and the Fed will decrease rates by about 50 bps next year to support weakening economy. [0#FF:]
The euro zone’s second-quarter GDP topped estimates, rising 0.7%, but Germany trailed.
Germany’s 10-year bond yield, the euro zone benchmark, rose to 0.91 percent.
Brent crude prices and U.S. West Texas Intermediate crude maintained early gains and were up 2.3% as fears over supply shortfalls ahead of the next OPEC meeting countered economic misgivings.
The dollar’s weakness helped gold trade up 0.3% to $1,759 an ounce.
