©Reuters. FILE PHOTO: Men wearing protective face masks amid the coronavirus disease (COVID-19) outbreak, use mobile phones in front of an electronic board showing Japan’s Nikkei index outside a stock exchange in Tokyo, Japan, on June 16, 2022. REUTERS/Kim Kyung-Hoon
By Carolyn Cohn and Tom Westbrook
LONDON/SINGAPORE (Reuters) – Global stocks and benchmark U.S. bonds headed for their first weekly gain in a month on Friday, with concerns about economic growth tempered by the prospect that falling prices of other raw materials could curb runaway inflation.
The week has been marked by sharp declines in commodities on concerns that the global economy looks shaky and interest rate hikes will hurt growth, which in turn is prompting traders to lower expectations for inflation and reduce some bets on the size of the increases.
“Inflation will remain elevated and above target, but it is increasingly likely to start to peak in the coming months,” said Andrew Hardy, investment manager at Momentum Global Investment Management.
“Markets could take that reasonably well, there is potential for recovery later in the year.”
Copper, a gauge of economic output with its wide range of construction and industrial uses, is headed for its steepest weekly decline since March 2020. It fell in London and Shanghai on Friday and is down more than 7% for the week. .
Tin fell 9.7% to $24,380 a tonne, its lowest level since March 2021 and on track for a weekly percentage drop of nearly 22%, its biggest on record.
futures fell more than 3% on the week to $109.70 a barrel and down 10% for the month, while benchmark grain prices sank, with Chicago wheat falling more than 8% for the week. [O/R][GRA/]
Gold rose 0.29% to $1,828.50 an ounce but was headed for a second straight weekly decline.
The declines have offered some relief to stocks as energy and food have been the drivers of inflation. After recent heavy losses, the MSCI World Stock Index is up 0.3% on the day and 2.4% this week, setting up for the first weekly gain since May.
The US rose 0.7% after Wall Street’s main indexes posted solid gains on Thursday. [.N]
European shares rose 0.82%, on track to post small weekly gains. rose 0.73%, also showing a small rebound on the week.
“While market concerns about an abrupt slowdown are to blame for the recent downward moves in commodity prices, lower commodity prices appear to be just what the doctor ordered for the global economy” said Brian Daingerfield, market strategist at NatWest.
“Much of our hard landing fears are related to concerns that are tied to commodity prices.”
The Federal Reserve’s commitment to rein in the highest inflation in 40 years is “unconditional”, US central bank chief Jerome Powell told lawmakers on Thursday, while acknowledging that interest rates strongly higher can increase unemployment.
Germany is headed for a gas shortage if Russian gas supplies remain as low as they are now due to the Ukraine conflict, and certain industries may have to close if there isn’t enough for the winter, Economy Minister Robert Habeck told reporters. Der Spiegel magazine on Friday.
German business morale fell more than expected in June.
Bonds rallied on hopes bets on aggressive rate hikes would have to be scaled back, with German two-year yields falling 26 basis points on Thursday in their biggest drop since 2008.
The German 10-year yield was down 4 bps on Friday after falling 29 bps on Thursday and headed for its first weekly decline since mid-May. [GVD/EUR]
The benchmark index held steady at 3.0666% after falling 7 bps on Thursday and [US/]
Bond funds suffered their biggest outflows since April 2020 in the week to Wednesday, while stocks lost $16.8 billion as markets stalled in peak bearish mode, weekly cash flow analysis showed on Friday. BofA.
The US dollar has fallen from 20-year highs last week. It was stable at $1.0529 per euro and fell 0.2% to 134.67 yen. [FRX/]
The battered yen has stabilized this week and received some support on Friday as Japanese inflation exceeded the Bank of Japan’s 2% target for the second month in a row, putting further pressure on its ultra-loose policy stance.
MSCI’s broader index of Asia-Pacific stocks outside of Japan rose 1.1%, helped by short sellers who bailed out Ali Baba (NYSE :), which rose nearly 6%, amid signs China’s tech crackdown is easing.
rose 1.2% for a weekly gain of 2%.