Stocks temper their inflation expectations on copper hammering

  • S&P futures rise 0.9%, European stocks gain 1.5%
  • MSCI global stocks eye up 2.5% weekly
  • Copper drops more than 7% in the week, oil drops 2%
  • German 10-year bond yields fall 4 bps

LONDON, June 24 (Reuters) – Global equities are on course for their first weekly gain in a month and Wall Street is set to open higher on Friday, on hopes that drops in copper and other commodities can curb runaway inflation.

The week was marked by sharp declines in commodities on concerns that the world economy is shaky and that interest rate hikes will hurt growth – which in turn is prompting traders to cut inflation expectations and reduce some bets on the size of the raises.

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

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“Markets can accept this reasonably well – there is potential for recovery later in the year.”

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

Copper, an indicator of economic output with its wide range of industrial and construction uses, is heading for its biggest weekly drop since March 2020. It was down in London and Shanghai on Friday and was down more than 7% for the week.

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

Brent crude futures rose more than $1 to $111.28 a barrel on Friday but remain down 2% on the week and 10% lower.

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

Gold was up 0.2% at $1,826.30 an ounce but was heading for a second straight weekly decline.

The price drops offered some relief to equities, as energy and food were the drivers of inflation.

European stocks (.STOXX) rose 1.5%, on track to post small weekly gains. Great Britain’s FTSE (.FTSE) was up 1.3%, also showing a small increase on the week.

“For long-term investors, the story hasn’t changed – falling markets offer more attractive valuations for high-quality companies with a competitive edge,” said Lewis Grant, senior portfolio manager for global equities at Federated Hermes.

The Federal Reserve’s commitment to curbing 40-year inflation is “unconditional,” U.S. central bank governor Jerome Powell told lawmakers on Thursday, acknowledging that sharply higher interest rates could increase unemployment. see More information

Germany is heading for a gas shortage if Russian gas supplies remain as low as they are now due to the conflict in Ukraine, and certain industries would have to be closed if there isn’t enough in the winter, Economy Minister Robert Habeck told the magazine. Der Spiegel on Friday. see More information

Ukraine said Russian forces had “fully occupied” a town south of the strategically important city of Lysychansk, in the eastern Luhansk region, on Friday. see More information

Bonds rose sharply on hopes that bets on aggressive rate hikes would have to be scaled back, with German two-year yields falling 26 basis points on Thursday, their biggest drop since 2008.

The German 10-year yield dropped 4 bps on Friday, after falling 29 bps on Thursday, and was heading for its first weekly decline since mid-May.

The benchmark 10-year Treasury yield gained 4 bps to 3.1076%, however, after falling 7 bps on Thursday.

Bond funds suffered their biggest outflows since April 2020 in the week to Wednesday, while equities lost $16.8 billion as markets got stuck in high-low mode, BofA’s weekly flows analysis showed. on Friday.

The US dollar fell from last week’s 20-year highs. The euro gained 0.23% to $1.05470 and the greenback was steady at 135.03 yen.

The frayed yen leveled off this week and drew some support Friday from Japanese inflation, beating the Bank of Japan’s 2% target for the second straight month, putting further pressure on its ultra-easy policy stance. see More information

MSCI’s broadest index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS) rose 1.1%, helped by the rescue of Alibaba’s short sellers (9988.HK) – which rose nearly 6% – amid that China’s technological repression is waning.

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

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Additional reporting by Brijesh Patel in Bangalore, Tom Westbrook in Singapore and Sam Byford in Tokyo; edited by Jacqueline Wong, John Stonestreet and Andrew Heavens

Our Standards: The Thomson Reuters Trust Principles.

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