Stocks lower their inflation expectations on copper

  • S&P futures rise 0.9%, European shares rise 1.5%
  • MSCI global shares eye 2.5% weekly gain
  • Copper falls more than 7% in the week, and oil is down 2%
  • German 10-year bond yields fell by 4 basis points

LONDON (Reuters) – Global stocks are headed for their first weekly gain in a month, and Wall Street is set to open higher on Friday on hopes that copper and other commodities will cut runaway inflation.

The week was marked by a sharp drop in commodity prices on concern that the global economy looks shaky and that higher interest rates will hurt growth – which in turn is prompting traders to cut inflation expectations and trim some bets on the magnitude of the hikes.

“Inflation will remain elevated and above target, but it is increasingly likely that it will begin to peak over the next few months,” said Andrew Hardy, chief investment officer at Momentum Global Investment Management.

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“Markets can take that reasonably well – there is potential for a recovery later in the year.”

US S&P futures rose 0.9% and MSCI global stock indexes rose 0.9% (.MIWD00000PUS) It was up 0.5% on the day and 2.5% on the week, making it its first weekly gain since May.

Copper, the leader in economic production with a wide range of industrial and construction uses, is headed for its biggest weekly decline since March 2020. It fell in London and Shanghai on Friday and fell more than 7% over the week.

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Tin fell nearly 15% on Friday, bringing losses this week to a record 25%, as investors fear slowing economic growth will reduce demand for the metal used for welding electronics.

Brent crude futures rose more than $1 to $111.28 a barrel on Friday but remained down 2% over the course of the week and 10%.

Over the month, while benchmark grain prices fell, with Chicago wheat down more than 8% for the week.

Gold rose 0.2% to $1,826.30 an ounce, but was headed for its second consecutive weekly decline.

Lower prices provided some relief for stocks, as energy and food were the drivers of inflation.

European stocks (.stoxx) It jumped 1.5%, on course for a small weekly gain. UK FTSE Index (.FTSE) It rose 1.3%, also showing a slight rise during the week.

“For long-term investors, the story has not changed — bear markets offer more attractive valuations for high-quality companies with a competitive advantage,” said Louis Grant, global equity portfolio manager at Federated Hermes.

US Central Bank President Jerome Powell told lawmakers on Thursday that the Federal Reserve’s commitment to rein in 40-year high inflation was “unconditional,” while acknowledging that sharply higher interest rates could drive up unemployment. Read more

Germany is heading towards a gas shortage if Russian gas supplies remain as low as they are now due to the conflict in Ukraine, and some industries will have to close if there is not enough in the winter, Economy Minister Robert Habeck told Der Spiegel on Tuesday. Friday. Read more

Ukraine said Russian forces had “completely occupied” a town south of the strategically important city of Lyschansk in the eastern Luhansk region as of Friday. Read more

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Bonds rose strongly on hopes of trimming bets on big rate hikes, with German two-year bond yields dropping 26 basis points on Thursday in their biggest drop since 2008.

The German 10-year yield fell 4 basis points on Friday after falling 29 basis points on Thursday, and is heading for its first weekly decline since mid-May.

With that said, the benchmark 10-year Treasury yield rose 4 basis points to 3.1076%, after falling 7 basis points on Thursday.

Bond funds suffered their biggest outflows since April 2020 in the week ending Wednesday while stocks lost $16.8 billion as markets were stuck in an extreme downward position, Bank of America’s weekly analysis of outflows showed on Friday.

The US dollar has fallen from last week’s 20-year highs. The euro rose 0.23% to $1.05470 and the greenback was flat at 135.03 yen.

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. Read more

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It rose 1.1 percent, supported by the rescue of short sellers from Alibaba (9988.HK) — which is up about 6% — amid hints that China’s crackdown on technology is ebbing.

Japan’s Nikkei Index (.N225) It rose 1.2% for a weekly gain of 2%.

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Additional reporting by Brijesh Patel in Bengaluru, Tom Westbrook in Singapore and Sam Byford in Tokyo. Editing by Jacqueline Wong, John Stonestreet and Andrew Heavens

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Our criteria: Thomson Reuters Trust Principles.

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