Global stocks advance as US recession fears fade: Markets wrap

(Bloomberg) — Global stocks rose on Friday, buoyed by growing optimism that the U.S. will avoid recession.

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Europe’s Stoxx 600 index added 0.2% in early trade as it headed for its best week since May. Bayer AG shares rose more than 7% following a landmark victory for the German company in a long-running cancer lawsuit over its Roundup herbicide. US equity futures pointed to modest gains for the S&P 500 and Nasdaq 100, both on course for their biggest weekly gains since November.

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The latest U.S. data, from inflation to jobless claims and retail sales, has reassured investors, supporting the view that the world’s largest economy is facing a “Goldilocks” scenario of inflation. Stock markets around the world largely erased last week’s losses as traders worried the Federal Reserve might not cut interest rates enough to stave off a recession.

Chris Weston, head of research at Pepperstone Group Ltd., said: “There is now little in the way of data that tracks sentiment in near-instant time.

The gains were stronger in Asia, where stocks went for their best weekly performance in a year, with a weaker yen boosting earnings prospects for exporters led by Japan. The currency is set for its sharpest weekly drop since May after falling 1.3% against the dollar on Thursday. It was at the 149 level, easing fears of a big carry trade.

“Asian equities are enjoying an impressive run today thanks to a renewed sense of ‘perfect balance’ thanks to recent well-anticipated economic releases,” said Hebei Chen, analyst at IG Markets Ltd. Still a strong recovery with no sign of slowing.”

Treasuries were flat after Thursday’s slide, as evidence of U.S. economic strength prompted traders to back off the race for a jumbo September rate cut. A 25 basis point cut by the central bank is expected to ease over 90 basis points by the end of 2024.

Soft landing

US officials are trying to use higher rates to reduce inflation without shrinking the economy. Alberto Musallem, president of the Fed Bank of St. Louis, said the time was right to cut interest rates. His Atlanta counterpart Rafael Bostick told the Financial Times he was “open” to a cut in September.

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“A soft landing is no longer a hope. It’s becoming a reality,” said David Russell at Trade Station. “These numbers suggest that recent market volatility is not really a growth scare. It’s a normal summer season amplified by moves in the currency market.”

Among commodities, gold was on track for a small weekly gain. Oil fell as the market weighed strong U.S. economic data and a possible strike against Iran or its proxies against a subdued Chinese demand outlook for Israel.

Highlights of this week:

• U.S. Housing Starts, University of Michigan Consumer Sentiment, Friday

• The central bank’s Austin Goolsbee speaks on Friday

• Housing Canada starts Friday

Some key movements in the markets:

Shares

• The Stoxx Europe 600 was up 0.2% as of 8:33 a.m. London time.

• S&P 500 futures rose 0.2%

• Nasdaq 100 futures rose 0.4%

• Futures for the Dow Jones industrial average rose 0.1%

• The MSCI Asia Pacific index rose 2.1%

• The MSCI emerging market index rose 1.5%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0977

• The Japanese yen rose 0.2% to 149.01 per dollar

• The offshore yuan was little changed at 7.1776 per dollar

• The British pound was up 0.1% at $1.2871

Cryptocurrencies

• Bitcoin rose 3.2% to $58,481.16

• Ether rose 2.7% to $2,618.15

Bonds

• The yield on 10-year Treasuries fell a basis point to 3.90%

• Germany’s 10-year yield fell one basis point to 2.25%.

• Britain’s 10-year yield fell two basis points to 3.91%

materials

• Brent crude fell 0.4% to $80.74 a barrel

• Spot gold was down 0.2% at $2,452.01 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Winnie Hsu, Richard Henderson, and Robert Brandt.

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