Global stock markets and oil prices rose on Friday after recent heavy losses on fears that rate hikes aimed at cooling decades-long inflation will trigger a global recession.
Amid a spate of data pointing to an economic slowdown, market watchers say investors now believe central banks may need to make less severe rate hikes and therefore pushing stock markets into bear market territory may have been an overstatement.
London shares rose 2.7 percent after investors brushed aside news of the ruling British Conservatives’ painful defeat in Thursday’s by-election.
The pound strengthened against the dollar despite data showing a fall in UK retail sales amid rising inflation.
Paris shares rose 3.2 percent in euro-zone trading, while Frankfurt rose 1.6 percent, with gains tempered by news of the deteriorating German business climate.
“Equities markets are taking a breather after being smashed… as recession fears took their toll,” Craig Erlam, an analyst at OANDA trading platform, told AFP.
However, he warned that unless the news improves, stock markets “remain vulnerable to another attack.”
Asian stock markets ended higher after Thursday’s gains on Wall Street.
Wall Street continued to climb Friday, with all three major indexes up more than 2 percent in late morning trading.
The rallies come after months of global markets being in turmoil due to rising inflation, interest rate hikes, the Ukraine war and lockdowns in China.
US stock markets plunged into bear market territory – down more than 20 percent from recent highs – as the US Federal Reserve began aggressively raising interest rates.
Federal Reserve Chairman Jerome Powell told lawmakers this week a recession is “certainly a possibility.”
He hinted that officials were poised to proceed with big rate hikes after last week’s US borrowing costs rose three-quarters of a point, sending markets plummeting.
Meanwhile, sentiment in Asia was boosted by comments from Chinese President Xi Jinping suggesting an end to China’s tech crackdown and possible new measures to stimulate the economy.
Hong Kong stocks were among the biggest gainers on Friday thanks to a rally in tech giants including Alibaba, Tencent and NetEase.
Analysts have pointed to falling commodity prices, a key driver of inflation, amid a possible recession reducing the need for sharp rate hikes as a possible explanation for the renewed bullish mood in equity markets.
“Falling interest rates and falling commodity prices, which normally accompany a slowdown in growth, have been framed as developments in favor of the rebound effort,” said Patrick O’Hare, analyst at Briefing.com.
“There is some truth to this, knowing that rising interest rates and rising commodity prices have been worrisome factors for most of the year, but one must be careful about straining the credibility of these rally catalysts, knowing that slower growth will lead to a Decline will lead to earnings growth prospects” for companies, he added.
The revised US consumer sentiment data – the first read of which may have helped push the Federal Reserve into its massive 0.75 percentage point hike – also showed weaker inflation expectations and a new record low in consumer confidence.
“Today’s numbers seem to indicate that the Federal Reserve may have overreacted,” said Michael Hewson of CMC Markets.
“This drop in inflation expectations has served as an additional boost for markets heading into the weekend,” he added.
– Key figures at 1530 GMT –
New York – Dow: increase of 2.2 percent to 31,338.15 points
EURO STOXX 50: increase of 3.0 percent to 3,538.15
London – FTSE 100: up 2.7 percent at 7,208.81 (close)
Frankfurt – DAX: up 1.6 percent at 13,118.13 (close)
Paris – CAC 40: up 3.2 percent at 6,073.35 (close)
Tokyo – Nikkei 225: up 1.2 percent at 26,491.97 (close)
Hong Kong – Hang Seng Index: up 2.1 percent at 21,719.06 (close)
Shanghai – Composite: up 0.9 percent at 3,349.75 (close)
Euro/Dollar: UNCHANGED as of late Thursday at $1.0523
Pound/dollar: rise to $1.2290 from $1.2260
Euro/Pound: UP at 85.85p from 85.83p
Dollar/yen: rise to 135.10 yen from 134.95 yen
North Sea Brent crude: up 3.5 percent to $113.85 a barrel
West Texas Intermediate: up 3.9 percent to $108.34 a barrel
#Stock #oil #rally
