Global stocks head for fourth straight week of gains

London/Tokyo — World stocks headed for a fourth straight week of gains on Friday as investors scaled back views on how far US interest rates and inflation can climb, while oil recouped some of the previous week’s losses.

A slight easing of inflation readings drove global stocks higher and capped a rising dollar this week, though a string of Fed speakers dampened expectations of the central bank going slow on further policy tightening.

“Inflation seems to have turned and that was positive, the growth stocks are outperforming again,” said Matthias Scheiber, global head of portfolio management for multi-asset solutions at Allspring.

“I wouldn’t be surprised if we have a good finish into the weekend,” he added, though he said investors remained cautious.

MSCI’s world stock index was up 0.1% and was showing a 1.8% rise on the week.

S&P futures gained 0.53% after the S&P index closed down 0.07%.

European stocks rose 0.35% and were heading for weekly gains of more than 1%. Britain’s FTSE climbed 0.56% and was eyeing a near-1% rise on the week.

Investors are focused on further inflation data later on Friday, with the publication of the University of Michigan’s preliminary survey of consumers for August.

Odds of a 75 basis points US hike in September were as high as 68% earlier in the week, but are now around 34%, where they were a week ago.

However, San Francisco Federal Reserve Bank president Mary Daly said on Thursday that while a 50 basis point rate hike next month “makes sense” given economic data, she’d be open to a bigger hike if necessary. The rate is currently in the 2.25%-2.5% range.

Chicago Fed President Charles Evans said he believed the Fed would likely need to lift its policy rate to 3.25%-3.5% this year and to 3.75%-4% by the end of next year, in line with what Fed Chair Jerome Powell signalled after the Fed’s latest meeting in July.

In addition, Minneapolis Fed president Neel Kashkari said he hadn’t “seen anything that changes” the need to raise the Fed’s policy rate to 3.9% by year-end and to 4.4% by the end of 2023.

“There are too many uncertainties to know the path of oil and other CPI prices ahead, but the peak of inflation is clearly behind us,” Nikko Asset Management chief global strategist John Vail wrote in a note.

“The key question is how far and how fast it will fall. We believe inflation will be quite sticky and central banks will need to be more hawkish than consensus.”

The dollar gained 0.24% against a basket of currencies while the euro lost 0.26% to $1.0289. Sterling dropped 0.36% against the dollar to $1.2170 after data showing British GDP fell 0.1% on the quarter.

US 10-year Treasury yields were trading at 2.888% after hitting a near-three-week high of 2.906%.

Benchmark German 10-year government bond yields rose above 1% for the first time in two weeks.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.16%, heading for a weekly gain of 1%.

Hong Kong’s Hang Seng index rose 0.46%, but Chinese blue-chip stocks dipped 0.1%.

Japan’s Nikkei was the major outlier, surging 2.62% to its highest level since January as markets reopened after a national holiday.

Brent crude was headed for a weekly climb of more than 3%, recouping part of last week’s 14% tumble, as recession fears eased, though an uncertain demand outlook capped gains.

Brent crude oil futures rose 0.41% to $100.01 a barrel. US West Texas Intermediate crude gained 0.18% to $94.52.

Spot gold was down 0.1% at $1,787 an ounce.

Reuters