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World stocks rally, dollar dips as investors weigh spending data, inflation scares

World stocks rally, dollar dips as investors weigh spending data, inflation scares

World stocks rally, dollar dips as investors weigh spending data, inflation scares

World stocks rally, dollar dips as investors weigh spending data, inflation scares (credits:google)

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  • Global markets firmer
  • Chinese economy slowed sharply in Q2
  • U.S. yields, dollar pull back after Fed officials’ comments
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As investors decreased their expectations of an aggressive interest rate move by the Federal Reserve this month and as U.S. spending data outperformed estimates, global shares increased on Friday, the currency fell, and oil prices increased.

As central banks scramble to control raging inflation, investors continue to worry that the global economy is headed for a recession. This week, sharp interest rate increases were observed in Canada, New Zealand, Chile, South Korea, and the Philippines. Many people are still processing how Italy’s political turmoil has subsided.

Chinese statistics released on Friday showed annualised 0.4 percent growth in the second quarter, the weakest since at least 1992, excluding early 2020 when the COVID pandemic broke out. This data stoked fears of an economic slump.

The findings demonstrate the enormous damage caused by the widespread COVID lockdowns. It drove down Chinese shares by 1.7% and brought the.CSI300 Asian ex-Japan index to two-year lows (.MIAPJ0000PUS).

Investors in other countries saw the positive side.

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According to Sam Stovall, chief financial strategist at CFRA, “the market is ready for a short-term snapback” and “we got better-than-expected numbers from Citigroup (C.N) and retail sales that presented basic grounds for investors to be hopeful.”

UBS strategist Rohan Khanna cited Thursday’s remarks by St. Louis Fed President James Bullard and Fed Governor Christopher Waller, who preferred a 75 basis-point rate hike in July as opposed to the 100 bps that some had anticipated, as favourable for Friday’s trading. Bullard and Waller are regarded as hawks on policy.

The Italian president, however, rejected Mario Draghi’s resignation, preventing the government from immediately dissolving even though the coalition’s future is still uncertain. View More

The global MSCI stock index (.MIWD00000PUS) increased 1.46 percent and the pan-European STOXX 600 index (.STOXX) increased 1.79 percent. As encouraging retail sales data allayed worries about an economic slowdown, Wall Street’s major indexes traded higher, and shares of Citigroup rose following quarterly earnings.

However, the second quarter profits of firms, which have so far largely disappointed, may put pressure on traders overall.

On Friday, a number of European companies revealed disappointing results, while U.S. bank Wells Fargo reported declining profitability and increased reserves for problematic loans.

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On Thursday, JPMorgan Chase and Morgan Stanley (MS.N) released rather disappointing financial results.

The S&P 500 (.SPX) increased 1.61 percent to 3,851.41 and the Nasdaq Composite (.IXIC) increased 1.41 percent, while the Dow Jones Industrial Average (.DJI) increased 1.85 percent.

REPOSITORY SETUP
Markets have been compelled to lower expectations for rate hikes due to weakening economy. Due to the energy supply crisis affecting Europe, traders have reduced their wagers on the European Central Bank tightening its monetary policy by year’s end.

After March 2023, rate reductions are being planned in U.S. markets.

Salman Ahmed, global head of macro at Fidelity International, stated that “we moved quickly from a stagflationary set-up to more of a recession-dominated one, and extremely strong inflation is adding to expectations that the Fed may need to do more front-loaded tightening.”

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While two-year yields remained steadfastly above the 10-year section, the curve inversion that frequently signals recession, Treasury yields across the curve decreased by two to three basis points.

10-year Treasury note rate decreased by 3.1 basis points to 2.928 percent. The two-year U.S. Treasury yield was down 1.3 basis points at 3.133 percent, which normally fluctuates in tandem with interest rate predictions.

German 10-year rates in Europe dropped 11 basis points to 1.071 percent, the lowest level since May 31. After a 20 bps increase on Thursday, Italy’s borrowing costs decreased, but its yield premium over Germany remained close to one-month highs.

The remarks made by the Fed officials caused the dollar index to fall from two-decade highs.

The euro increased to $1.0075 while the dollar index sank by 0.451 percent. The euro has lost more than 1% of its value this week after reaching parity with the dollar for the first time in 20 years.

The yen strengthened 0.2 percent to 138.8, pulling back from lows of over 140 per dollar, last reached in 1998.

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A result of the growth concerns, commodities have been negatively impacted. Copper prices are expected to have their biggest weekly decline in more than two years, and U.S. crude recently increased by 1.79 percent to $97.49 per barrel while Brent was up 1.97 percent on the day at $101.05.

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