Global stocks rise as US recession fears fade: Markets Wrap

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

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The pan-European STOXX 600 index rose 0.2% in early trade, on track for its best week since May. Bayer AG shares rose more than 7% after the German company won a major victory in a long-running lawsuit against its Roundup weedkiller. U.S. stock futures pointed to modest gains for the S&P 500 and Nasdaq 100, both on track for their biggest weekly advances 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 heading toward a “Goldilocks” scenario of subdued inflation coupled with resilient growth. Stock markets around the world have largely erased losses from last week, when traders worried the Federal Reserve would not cut interest rates fast enough to prevent a recession.

“There is little data right now that could disrupt sentiment in the near term,” said Chris Weston, head of research at Pepperstone Group Ltd.

The gains were strongest in Asia, where stocks were also on track for their best week in more than a year, led by Japan where a weaker yen boosted exporter earnings expectations. The currency is set for its biggest weekly decline since May after falling 1.3% against the dollar on Thursday. The dollar was at 149, easing concerns about a massive carry trade unraveling.

“Asian stocks are enjoying an impressive performance today, driven by a renewed sense of ‘perfect balance’ thanks to recent long-awaited economic releases,” said Hebei Chen, analyst at IG Markets Ltd. “Japanese stocks, in particular, are continuing their strong recovery with no signs of slowing down yet.”

U.S. Treasury bond prices steadied after falling on Thursday, as evidence of a strong U.S. economy prompted traders to scale back bets on a big interest rate cut in September. The Federal Reserve’s 25 basis point rate cut remains in full swing, with more than 90 basis points of easing expected by the end of 2024.

soft landing

U.S. officials are trying to use higher interest rates to ease inflation without causing the economy to contract. St. Louis Federal Reserve Bank President Alberto Musallem said the time is approaching when it would be appropriate to cut rates. His counterpart in Atlanta, Raphael Bousik, told the Financial Times he was “open” to cutting rates in September.

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“A soft landing is no longer a hope, it’s a reality,” said David Russell of TradeStation. “These numbers also suggest that the recent market volatility wasn’t actually a growth scare. It was just a normal summer season amplified by moves in the currency market.”

In commodities, gold was on track for a small weekly gain. Oil prices fell slightly as the market weighed on strong U.S. economic data and a possible attack by Iran or its proxies on Israel against a weak outlook for Chinese demand.

Main events this week:

• U.S. housing starts, University of Michigan consumer confidence index, Friday

• Federal Reserve Board Member Austin Goolsbee speaks Friday

• Housing construction begins in Canada, Friday

Some key movements in the markets:

Stocks

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

• S&P 500 futures rose 0.2%.

• Nasdaq 100 futures rose 0.4%.

• Dow Jones Industrial Average futures rose 0.1%.

• MSCI Asia Pacific Index rose 2.1%

• The MSCI Emerging Markets Index rose 1.5%.

Currencies

• The Bloomberg Dollar Index was little changed.

• The euro was little changed at $1.0977.

• The Japanese yen rose 0.2% to 149.01 yen per dollar.

• The offshore yuan was little changed at 7.1776 against the dollar.

• The pound rose 0.1% to $1.2871.

Cryptocurrencies

• Bitcoin rose 3.2% to $58,481.16

• Ether price rose 2.7% to $2,618.15

Bonds

• The yield on the 10-year US Treasury note fell one basis point to 3.90%.

• The yield on German 10-year bonds fell one basis point to 2.25%.

• The yield on the 10-year British bond fell by two basis points to 3.91%.

Goods

• Brent crude fell 0.4% to $80.74 a barrel.

• Spot gold fell 0.2 percent to $2,452.01 per ounce.

This story was produced with the help of Bloomberg Automation.

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

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