Global Stocks Advance as US Recession Fears Fade: Markets Wrap

(Bloomberg) -- Global stocks rose on Friday, with sentiment buoyed by growing optimism that the US will avoid a recession.

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Europe’s Stoxx 600 Index added 0.2% in early trade as it headed for its best week since May. Bayer AG shares rose more than 7% following a significant win for the German company in long-running cancer litigation over its Roundup weedkiller. US equity futures signaled modest gains for the S&P 500 and the Nasdaq 100, which are both on course for their biggest weekly advance since November.

The latest US data, from inflation to jobless claims and retail sales, has reassured investors, supporting the view that the world’s biggest economy is heading for a “Goldilocks” scenario of contained inflation accompanied by resilient growth. Stock markets around the world have largely erased last week’s losses, when traders were worried the Federal Reserve won’t cut interest rates fast enough to prevent a recession.

“There is little in the data flow now to really derail sentiment in the immediate near-term,” said Chris Weston, head of research at Pepperstone Group Ltd.

The gains were strongest in Asia, where stocks also headed for their best weekly performance in over a year, led by Japan as a weak yen boosts exporters’ earnings prospects. The currency is set for its sharpest weekly drop since May after sliding 1.3% against the dollar Thursday. It was around the 149 level, easing fears of a massive carry trade unwind.

“Asian equities are enjoying an impressive run today, driven by a renewed sense of ‘perfect balance’ thanks to recent well-anticipated economic releases,” said Hebe Chen, an analyst at IG Markets Ltd. “Japanese stocks, in particular, continue their robust recovery with no signs of slowing down yet.”

Treasuries were steady after Thursday’s dip, as evidence of US economic strength prompted traders to dial back bets for a jumbo September rate reduction. A 25 basis-point cut by the Fed remains fully priced, with more than 90 basis points of easing expected by the end of 2024.

Soft Landing

US officials have been trying to use higher rates to ease inflation without causing the economy to contract. Fed Bank of St. Louis President Alberto Musalem said the time is nearing when it will be appropriate to cut rates. His Atlanta counterpart Raphael Bostic told the Financial Times he’s “open” to a reduction in September.

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

In commodities, gold was on track for a small weekly gain. Oil edged lower as the market weighed strong US economic data and a possible attack by Iran or its proxies on Israel against a lackluster Chinese demand outlook.

Key events this week:

• US housing starts, University of Michigan consumer sentiment, Friday

• Fed’s Austan Goolsbee speaks, Friday

• Canada housing starts, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.2% as of 8:33 a.m. London time

• S&P 500 futures rose 0.2%

• Nasdaq 100 futures rose 0.4%

• Futures on the Dow Jones Industrial Average rose 0.1%

• The MSCI Asia Pacific Index rose 2.1%

• The MSCI Emerging Markets Index rose 1.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0977

• The Japanese yen rose 0.2% to 149.01 per dollar

• The offshore yuan was little changed at 7.1776 per dollar

• The British pound rose 0.1% to $1.2871

Cryptocurrencies

• Bitcoin rose 3.2% to $58,481.16

• Ether rose 2.7% to $2,618.15

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.90%

• Germany’s 10-year yield declined one basis point to 2.25%

• Britain’s 10-year yield declined two basis points to 3.91%

Commodities

• Brent crude fell 0.4% to $80.74 a barrel

• Spot gold fell 0.2% to $2,452.01 an ounce

This story was produced with the assistance of Bloomberg Automation.

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

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