By Tom Westbrook
SINGAPORE, June 24 (Reuters) – Stocks and bonds were both headed for their first weekly gain in a month on Friday as investors wagered on central banks bringing inflation to heel, though growth fears dragged on commodities.
Copper, a bellwether for economic output with its wide range of industrial and construction uses, slid 3% in Shanghai SCFc1 and is down more than 7% for the week – its sharpest weekly fall since the pandemic-driven financial markets meltdown in March 2020.
Oil also fell overnight, and Brent crude futures LCOc1 are down 2% on the week to $110.62 a barrel, while benchmark grain prices sank with Chicago wheat Wv1 off nearly 9% for the week and at its lowest since March at $9.42 a bushel. O/RGRA/
The price falls have made for some relief in equities since energy and food have been the drivers of inflation. After some heavy recent losses, MSCI’s World equities index .MIWD000000PUS is up 2% on the week.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1% on Friday, flattered by short sellers bailing out of Alibaba 9988.HK – which rose 5% – amid hints that China’s technology crackdown is abating.
Japan’s Nikkei .N225 rose 0.8% for a 1.6% weekly gain and S&P 500 futures ESc1 were flat after the index .SPX rose about 1% overnight. The US dollar is hovering just below a two-decade high against a basket of major currencies =USD.
“While market worries about an abrupt slowdown are the culprit behind recent moves lower in raw materials prices, lower commodity prices do feel like they could be just what the doctor ordered for the global economy,” said NatWest markets strategist Brian Daingerfield.
“So much of our hard landing fears relate to concerns that link back to commodity prices.”
Soft data through this week has been to blame.
Gauges of factory activity in Japan, Britain, the euro zone and United States all softened in June, with US producers reporting the first outright drop in new orders in two years in the face of slumping confidence.
Bonds rallied hard on hopes the bets on aggressive rate hikes would have to be curtailed, with German two-year yields DE2YT=RR down 22 basis points in their biggest drop since 2008. GVD/EUR
The benchmark 10-year Treasury yield US10YT=RR fell 7 bps overnight and was steady at 3.0944%. US/
The US dollar has slipped from recent highs, but not too far as investors remain speculative. It was last fairly steady at $1.0529 per euro EUR=EBS and bought 134.79 yen JPY=EBS. FRX/
The battered yen has steadied this week and drew a little support on Friday from Japanese inflation topping the Bank of Japan’s 2% target for a second straight month, putting some more pressure on its ultra-easy policy stance.
European Central Bank and Federal Reserve speakers will be watched closely later in the day, as will British retail sales data and German business confidence. Beyond that, the main worry is what it all means for company performance.
“Second earnings quarter reports will send shockwaves to the market as the earnings outlook hasn’t deteriorated materially so far, and that will further build concerns of a recession,” said Charu Chanana, market strategist at brokerage Saxo in Singapore.
World FX rates YTDhttp://tmsnrt.rs/2egbfVh
Global asset performancehttp://tmsnrt.rs/2yaDPgn
Asian stock markets https://tmsnrt.rs/2zpUAr4
(Reporting by Tom Westbrook Editing by Shri Navaratnam)
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