Equities dampen inflation expectations that copper will strike

LONDON, June 24 (Reuters) – World equities were heading for their first weekly rise in a month, with Wall Street opening higher on Friday in the hope that a fall in copper and other commodities could put a brake on current inflation.

The week has been marked by sharp declines in commodities due to concerns that the world economy is looking shaky and that interest rate increases will hurt growth – which in turn will cause traders to cut inflation expectations and reduce some efforts on the size of the increases.

“Inflation will remain high and above target, but it is increasingly likely to peak in the coming months,” said Andrew Hardy, chief investment officer at Momentum Global Investment Management.

“Markets can do reasonably well – there is potential for improvement later in the year.”

US S&P futures rose 0.9% and MSCI’s world stock index (.MIWD00000PUS) was up 0.5% on the day and 2.5% on the week, setting up for the first weekly rise since May.

Copper, a watch for economic production with its wide range of industrial and construction uses, is heading for its steepest weekly fall since March 2020. It fell in London and Shanghai on Friday and is down more than 7% a week.

Tinn fell by almost 15% on Friday, taking losses this week to a record high of 25%, as investors fear that declining economic growth will reduce the demand for the metal used in solder for electronics.

Brent oil futures rose more than $ 1 to $ 111.28 a barrel on Friday, but are still down 2% on the week and 10%

per month, while grain reference prices fell, with Chicago wheat down more than 8% for the week.

Gold rose 0.2% to $ 1,826.30 per ounce, but was heading for a second weekly fall in a row.

The fall in prices has provided some relief for equities, since energy and food have been the drivers of inflation.

European stocks (.STOXX) jumped 1.5%, on their way to posting small weekly gains. The UK’s FTSE (.FTSE) rose 1.3%, also showing a slight increase in the week.

“For long-term investors, history has not changed – falling markets offer more attractive valuations on high-quality companies with competitive advantages,” said Lewis Grant, senior portfolio manager for global equities at Federated Hermes.

The Federal Reserve’s commitment to curb 40-year high inflation is “unconditional,” US Federal Reserve Chairman Jerome Powell told lawmakers on Thursday, acknowledging that sharply higher interest rates could push up unemployment. read more

Germany is heading for a gas shortage if Russia’s gas supplies remain as low as they are now due to the Ukraine conflict, and certain industries will have to be shut down if that is not enough for the winter, Economy Minister Robert Habeck told Der Spiegel magazine. Friday. read more

Ukraine said Russian forces had “fully occupied” a city south of the strategically important city of Lysychansk in the eastern Luhansk region as of Friday. read more

Bonds rose sharply in the hope that bets on aggressive rate hikes would have to be reduced, with German two-year yields falling 26 basis points on Thursday, with the biggest drop since 2008.

The German 10-year rate fell 4 bp on Friday after falling 29 bp on Thursday, and was heading for its first weekly fall since mid-May.

However, the 10-year reference rate at the Treasury rose 4 bps to 3.1076%, after falling 7 bp on Thursday

The bond funds suffered their largest outflows since April 2020 in the week to Wednesday, while equities lost $ 16.8 billion as the markets remained in maximum bearish mode, BofA’s weekly analysis of flows showed on Friday.

The US dollar has fallen from last week’s 20-year highs. The euro rose 0.23% to $ 1.05470 and the US currency was flat at 135.03 yen.

The beaten yen has stabilized this week and received some support on Friday from Japanese inflation, which tops the Bank of Japan’s target of 2% for the second month in a row, which puts more pressure on its ultra-simple political stance. read more

MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) rose 1.1%, aided by short sellers’ rescue of Alibaba (9988.HK) – which rose nearly 6% – amid hints that China’s technology downturn is slowing.

Japanese Nikkei (.N225) rose 1.2% for a weekly increase of 2%.

Further reporting by Brijesh Patel in Bengaluru, Tom Westbrook in Singapore and Sam Byford in Tokyo; editing by Jacqueline Wong, John Stonestreet and Andrew Heavens

Our standards: Thomson Reuters Trust Principles.