Global stocks poised for weekly gains after slew of US data

Published On : 08/16/2024

By Lawrence Delevingne and Naomi Rovnick

(Reuters) -U.S. and global shares pushed higher on Friday, adding to weekly gains after encouraging economic data this week helped soothe fears of a recession in the world’s largest economy.

In midday U.S. trading, the Dow Jones Industrial Average added 0.14% – bringing its weekly gain to 2.7% – while the S&P 500 increased 0.13%, and the Nasdaq Composite added 0.25%, up about 3.7% and 5% on the week, respectively.

MSCI’s main world stock index rose 0.43%, adding to its recovery from market turmoil last week generated by U.S. recession fears and foreign exchange gyrations. Europe’s STOXX share index rose 0.3% on Friday and headed for a weekly rise.

The VIX U.S. stock volatility index, broadly considered the market’s fear gauge, sat at benign levels of about 15 after hitting a four-year high of 65 early last week.

The sharp turnaround in market sentiment came after a batch of U.S. data this week showed inflation was moderating and retail spending was robust.

That has helped the market narrative move away from recession concerns, sparked by a weak U.S. jobs report in early August, to confidence the economy can keep growing. Softer inflation data has also reinforced expectations of an interest rate cut by the U.S. Federal Reserve in September.

On Friday, a survey showed that U.S. consumer sentiment rose in August, driven by developments in the race for the White House, while inflation expectations remained unchanged over the next year and beyond.

The so-called soft landing scenario may not hold, Aviva Investors multi-asset portfolio manager Sotirios Nakos cautioned, adding that markets could keep swinging with every new economic data point.

“The market went very quickly to price more negative data and now what we’re primarily seeing is the rapid unwinding of that,” he said.

“I do not think a lot of money has participated in this bounceback,” he added, noting that thin summer trading conditions in August would have exacerbated market moves.

With central bankers from around the globe set to gather in Jackson Hole, Wyoming, next week, traders expect the Fed to lower borrowing costs from a 23-year high next month but have reduced their bets on an emergency 50-basis-point cut to 25%, down from 55% a week ago, the CME FedWatch tool showed.

Invesco multi-asset fund manager David Aujla said the U.S. was unlikely to go into recession. But markets likely would be more volatile through to the end of this year, he said, particularly around November’s U.S. presidential election.

“We prefer to focus on fundamentals in guiding our investment decisions,” he added.

Easier U.S. Treasury yields on Friday partly unwound the previous session’s surges as investors digested data showing a resilient U.S. consumer and inflation trending lower, leaving the Fed ample scope for a small rate cut next month.

The yield on the benchmark U.S. 10-year Treasury note declined 2 basis points to 3.902%.

GAINS IN ASIA

In Asia, Japan’s Nikkei share average climbed 3.6% on Friday and notched its best week in more than four years, while Hong Kong’s Hang Seng Index rose 1.9%.

Japanese stocks gained following heavy losses last week after a surprise Bank of Japan rate cut sent the yen soaring against the dollar, wrecking yen-funded stock trades.

The dollar fell against the yen on Friday, and was softer against other major currencies after disappointing U.S. housing numbers. U.S. single-family homebuilding fell in July as higher mortgage rates and house prices kept prospective buyers on the sidelines, suggesting the market remained depressed at the start of the third quarter.

The euro struggled to break above $1.10, though.

Oil prices fell on Friday and were on track for a weekly decline, with Brent slipping to around $80 a barrel after a string of dismal indicators for July from China overshadowed geopolitical risks.

U.S. crude lost 1.78% to $76.77 a barrel and Brent fell to $79.81 per barrel, down 1.52% on the day.

Spot gold rose 1.6%. [GOL/]

(Reporting by Lawrence Delevingne in Boston and Naomi Rovnick in LondonAdditional reporting by Rae Wee in SingaporeEditing by Kim Coghill, Frances Kerry and Mark Potter)

Jessica Weisman-Pitts

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