World stocks extend week-long rebound after slew of US data
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[August 17, 2024] By
Lawrence Delevingne and Naomi Rovnick
(Reuters) -Global shares pushed higher on Friday, adding to weekly
gains, after encouraging U.S. economic data helped soothe fears of a
recession in the world's largest economy.
On Wall Street, stocks extended their biggest weekly percentage gains of
the year. The Dow Jones Industrial Average finished up about 0.25% -
bringing its weekly gain to 2.7% - while the S&P 500 and Nasdaq
Composite both increased 0.2%; they were up about 3.7% and 5% on the
week, respectively.
MSCI's main world stock index rose 0.5%, adding to its recovery from
market turmoil last week generated by U.S. recession fears and foreign
exchange gyrations. The pan-European STOXX 600 index rose 0.3% on the
day, still hovering at its two-week high and logging its best week since
May 6, up 2.4%.
The VIX U.S. stock volatility index, broadly considered the market's
fear gauge, sat at benign levels of about 15 after hitting a four-year
high of 65 early last week.
The sharp turnaround in market sentiment came after a batch of U.S. data
this week showed inflation was moderating and retail spending was
robust.
That has helped the market narrative move away from recession concerns,
sparked by a weak U.S. jobs report in early August, to confidence the
economy can keep growing. Softer inflation data has also reinforced
expectations of an interest rate cut by the U.S. Federal Reserve in
September.
On Friday, a survey showed that U.S. consumer sentiment rose in August,
driven by developments in the U.S. presidential race, while inflation
expectations remained unchanged over the next year and beyond.
Scott Wren, a Wells Fargo Investment Institute strategist, said stocks
were reacting to the likelihood that while the economy is slowing, the
probability of a recession is low and earnings estimates have edged
higher.
"Modest growth with moderating inflation is a good environment for
stocks and bonds," Wren said in an email.
With central bankers from around the globe set to gather in Jackson
Hole, Wyoming, next week, traders expect the Fed to lower borrowing
costs from a 23-year high next month but have reduced their bets on an
emergency 50-basis-point cut to 25%, down from 55% a week ago, the CME
FedWatch tool showed.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., July 3, 2024. REUTERS/Brendan McDermid/File
Photo
Invesco multi-asset fund manager David Aujla said the U.S. is
unlikely to go into recession. But markets likely would be more
volatile through to the end of this year, Aujla said, particularly
around November's U.S. presidential election.
Easier U.S. Treasury yields on Friday partly unwound the previous
session's surges. The yield on the benchmark U.S. 10-year Treasury
note declined 4 basis points to 3.883%.
DOLLAR, OIL DECLINE
In Asia, Japan's Nikkei share average climbed 3.6% on Friday and
notched its best week in more than four years, while Hong Kong's
Hang Seng Index rose 1.9%.
Japanese stocks gained following heavy losses last week after a
surprise Bank of Japan rate cut sent the yen soaring against the
dollar, wrecking yen-funded stock trades.
The dollar fell against the yen on Friday, and was softer against
other major currencies after disappointing U.S. housing numbers.
U.S. single-family homebuilding fell in July as higher mortgage
rates and house prices kept prospective buyers on the sidelines,
suggesting the market remained depressed at the start of the third
quarter. The euro added 0.47% versus the dollar.
Oil prices settled down nearly 2%, with global benchmark Brent crude
below $80 a barrel, but were little changed on the week as investors
tempered expectations of demand growth from top oil importer China.
Brent fell $1.36, or 1.7%, to settle at $79.68 per barrel and U.S.
crude dropped $1.51, or 1.9%, to $76.65.
Spot gold prices soared to an all-time high, rising more than 2%. [GOL/]
(Reporting by Lawrence Delevingne in Boston and Naomi Rovnick in
LondonAdditional reporting by Rae Wee in SingaporeEditing by Kim
Coghill, Frances Kerry, Will Dunham, Mark Potter and Marguerita
Choy)
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