- MSCI World Index up 0.2%; nearly 6% for the month
- The dollar is recouping early losses to trade flat against its peers
- Eurozone GDP data beats expectations; clouds ahead
LONDON, July 29 (Reuters) – Global stocks rose on Friday, on course for their best month since late 2020, as euro-zone growth beat expectations, while the dollar staged a rebound from daily lows, while traders rose new US data awaits clues on the outlook for interest rates.
With inflation soaring in major markets and central bankers struggling to raise interest rates without hurting growth, riskier markets such as equities tend to react positively to any perceived softening in sentiment from policymakers.
Stocks rose after data on Thursday showed the US economy contracted in the second quarter as traders bet that interest rates would rise at a slower pace. Meanwhile, Friday’s euro-zone figures beat expectations but recession fears mount as energy inflation continues to rise amid conflict in Ukraine.
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The MSCI World Index (.MIWD00000PUS) was last up 0.2% and was on course for a monthly gain of almost 6%, its best since November 2020, buoyed by broader gains in European markets, with the STOXX Europe 600 ( .STOXX) up 0.9%.
US stocks are likely to gain later in the session, with futures for the S&P 500 and Nasdaq up 0.7% and 1.1% respectively, with all eyes on fresh wages and consumer price data for clues to the health of the economy to get economy.
Despite the upbeat end of the month for equities, Mark Haefele, chief investment officer at UBS Global Wealth Management, said investors should tread cautiously.
“In the short term, we believe the risk/reward trade-off for broad equity indices will be muted. Equities are pricing in a ‘soft landing’ but the risk of a deeper ‘collapse’ in economic activity is heightened.”
Some of that concern was evident in Asian stock markets overnight after Beijing failed to give any indication of its full-year GDP growth target following a high-level Communist Party meeting. Continue reading
MSCI’s broadest index of Asia Pacific equities outside of Japan (.MIAPJ0000PUS) fell 0.4%.
News in the prior session that US gross domestic product shrank 0.9% in the most recent quarter, adding to a 1.6% decline in the previous quarter, weighed on the country’s bond yields and the greenback, but both were higher on Friday a recovery underway.
The yield on the benchmark 10-year Treasury rebounded slightly from overnight lows to trade at 2.7229%, while the yield on the two-year bond, which normally moves in step with interest rate expectations, came in at 2.8885%.
The dollar was last flat against a basket of its key peers – but is still on course for a second month of gains.
Futures markets are now predicting that US interest rates will peak by December this year compared to June 2023, and the Federal Reserve will cut interest rates by nearly 50 basis points next year to support slowing growth. [0#FF:]
Amid the slowdown in the US, second-quarter GDP data from the euro zone beat expectations, up 0.7%, although growth in the region’s largest economy, Germany, lagged behind.
In response, the 10-year German bond yield – the benchmark for the eurozone – was last seen rising 0.91%.
In commodities, Brent crude futures and US West Texas Intermediate crude extended early gains and were last up 2.3% as concerns over supply shortages ahead of the next OPEC ministers’ meeting offset doubts over the economic outlook.
Gold pared some of its early gains and rose 0.3% to $1,759 an ounce, helped by a weaker dollar.
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Additional reporting by Kanupriya Kapoor and Tom Westbrook; Edited by Angus MacSwan and Jacqueline Wong
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