U.S., world stocks toast earnings, U.S. rate outlook

[May 27, 2022]  By Carolyn Cohn

LONDON (Reuters) - U.S. stocks were indicating a higher open on Wall Street and world stocks eyed their first weekly gain in eight on Friday on a more upbeat earnings view and after this week's Federal Reserve minutes dampened fears of mega-high interest rates.

Optimistic U.S. earnings outlooks from department store operator Macy's Inc and discount chains Dollar General Corp and Dollar Tree boosted U.S. stocks on Thursday.

The Fed's minutes of its May meeting released on Wednesday confirmed two more 50-basis-point hikes each in June and July, but policymakers also suggested the potential for a pause later in the year.

"It's all flowed through from the FOMC (Federal Open Market Committee) minutes," said Giles Coghlan, chief currency analyst at HYCM.

"Investors were relieved there wasn't a 75 basis points hint."

Markets would focus on the April core PCE price index for the United States - the Fed's preferred inflation measure - due later on Friday for further signs on whether inflation was running hot, Coghlan added.

S&P futures rose 0.33% after the Dow Jones Industrial Average rose 1.61%, the S&P 500 gained 1.99%, and the Nasdaq Composite jumped 2.68% on Thursday.

The MSCI world equities index rose 0.41%. It was heading for a 3.2% rise on the week and an almost 6% recovery from 18-month lows set two weeks ago.

Global equity funds saw inflows in the week to May 25 for the first week in seven, according to Refinitiv Lipper.

European shares hit a three-week high and were up 0.86%. Britain's FTSE also hit a three-week high, and was heading for its best weekly showing since mid-March. [.L]

Hong Kong shares rose 2.9% after better-than-expected first-quarter revenue growth from Alibaba and Baidu.

Asian shares also benefited from hopes of stabilising Sino-U.S. ties and more Chinese government stimulus.

The United States would not block China from growing its economy, but wanted it to adhere to international rules, Secretary of State Antony Blinken said on Thursday in remarks that some investors interpreted as positive for bilateral ties.

Bull and bear symbols for successful and bad trading are seen in front of the German stock exchange (Deutsche Boerse) in Frankfurt, Germany, February 12, 2019. REUTERS/Kai Pfaffenbach/

Japan's Nikkei advanced 0.7%, China's mainland blue-chips rose 0.2%，and Australia's resources-heavy index climbed 1.1%.

The swing in sentiment drove the dollar to one-month lows against an index of currencies before it reversed some losses to stand 0.17% higher.

The dollar is down 3.4% from 20-year highs hit earlier this month. The euro reached a one-month high before slipping 0.24%.

Oil prices were near two-month highs on the prospect of a tight market due to rising gasoline consumption in the United States in summer, and also the possibility of an EU ban on Russian oil.

But they fell on Friday, with U.S. crude down 0.29% to $113.74 a barrel. Brent dipped 0.04% to $117.35 per barrel. [O/R]

The yield on benchmark 10-year Treasury notes dipped 3 basis points to 2.7289%. It had hit a three-year high of 3.2030% earlier this month on fears rapid hikes from the Fed might undermine long-term growth.

The two-year yield, which rises with traders' expectations of higher fed fund rates, fell 2 bps to 2.4618%.

"All in all, a pronounced decompression of stress," said analysts at ING in a note.

German 10-year bond yields fell 4 bps to 0.955%.

Spot gold rose 0.46% to $1858.4 per ounce. [GOL/]

(Additional reporting by Stella Qiu in Beijing and Kevin Buckland in Tokyo; Editing by Kim Coghill, Bradley Perrett and Chizu Nomiyama)

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