Stocks temper inflation expectations on rising copper

  • S&P futures rise 0.9%, European stocks gain 1.5%
  • MSCI world stocks watch 2.5% weekly gain
  • Copper down more than 7% on week, oil down 2%
  • German 10-year yield falls by 4 bps

LONDON, June 24 (Reuters) – World stocks were heading for their first weekly gain in a month and Wall Street was set to open higher Friday in hopes that declines in copper and other commodities could curb runaway inflation.

The week was marked by sharp declines for commodities amid concerns that the global economy looks shaky and that rate hikes will hurt growth – in turn prompting traders to lower inflation expectations and scale back some bets on the magnitude of the hikes.

“Inflation will remain high and above target, but it is increasingly likely to peak in the coming months,” said Andrew Hardy, investment manager at Momentum Global Investment Management.

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“Markets could absorb that pretty well — there’s potential for recovery later in the year.”

US S&P futures were up 0.9% and the MSCI World Stock Index (.MIWD00000PUS) rose 0.5% on the day and 2.5% on the week, delivering its first weekly gain since May.

Copper, a model of economic output with its wide range of industrial and construction applications, is headed for its strongest weekly decline since March 2020. It fell on Friday in London and Shanghai, falling more than 7% on a weekly basis.

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

Brent oil futures rose more than $1 to $111.28 a barrel on Friday, but remain 2% lower than weekly and 10%

on the month, as benchmark grain prices fell, with Chicago wheat above 8% for the week.

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

The price declines have given stocks some relief, as energy and food have been the main drivers of inflation.

European equities (.STOXX) were up 1.5%, on track to record small weekly gains. The UK FTSE (.FTSE) rose 1.3% and also showed a small gain on the week.

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

The Federal Reserve’s commitment to curb 40-year high inflation is “unconditional,” US central bank chief Jerome Powell told lawmakers on Thursday, acknowledging that sharply higher interest rates could push up unemployment. read more

Germany is heading for a gas shortage if Russian gas supplies remain as low as they are today due to the conflict in Ukraine, and certain industries would have to shut down if there isn’t enough in winter, Economy Minister Robert Habeck told Der Spiegel magazine about Friday. read more

Ukraine said on Friday Russian forces “fully occupied” a town south of the strategically important city of Lysychansk in the eastern region of Luhansk. read more

Bonds rebounded hard in hopes that bets on aggressive rate hikes should be curtailed, with German two-year yields falling 26 basis points on Thursday, the biggest drop since 2008.

German 10-year yields fell 4 bps on Friday after dropping 29 bps on Thursday, heading for its first weekly decline since mid-May.

However, the benchmark 10-year government bond yield rose 4 bps to 3,1076%, after falling 7 bps on Thursday

Bond funds suffered their largest outflows since April 2020 in the week to Wednesday, as stocks lost $16.8 billion as markets were locked in maximum bearish mode, BofA’s weekly analysis of flows on Friday showed.

The US dollar has fallen from its 20-year high last week. The euro gained 0.23% to $1.05470 and the US currency held steady at 135.03 yen.

The battered yen has stabilized this week and received some support on Friday from Japanese inflation which surpassed the Bank of Japan’s 2% target for the second straight month, putting more pressure on its ultra-easy stance. read more

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 1.1%, aided by the bailout of short sellers from Alibaba (9988.HK) – which rose nearly 6% – amid hints that China’s tech heavy-handed occurrence decreases.

The Japanese Nikkei (.N225) 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; adaptation by Jacqueline Wong, John Stonestreet and Andrew Heavens

Our Standards: The Thomson Reuters Trust Principles.

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