Global equities rally as volatile week ends on a high

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LONDON (Reuters) – Global stock markets rallied on Friday after a volatile week in which sentiment on the global economic outlook rose and fell with each new headline on the Delta variant of the coronavirus.

A photographer takes pictures of traders before the opening of the German stock exchange in front of the empty DAX board at the stock exchange in Frankfurt, Germany on June 24, 2016. REUTERS / Staff / Remote / Files

European stock markets opened broadly higher while US equity futures showed a positive open for Wall Street later in the day. But Asian stocks, outside of Japan, were significantly lower.

Financial markets have swung from one direction to the other this week as investors attempt to assess what the burgeoning Delta variant means for the global economy.

After registering its biggest one-day drop since May on Monday, the S&P 500 stock index posted the biggest one-day jump since March a day later. He had to end the week up.

“The stock markets are reporting some symptoms of fatigue after a long rally and are recognizing the peak growth environment,” said Antonio Cavarero, investment manager at Generali Insurance Asset Management.

“But in the short term, actual returns are still too low to offer an alternative, so how what happens next depends on COVID and macro data.”

The IHS Markit Flash Composite Eurozone Purchasing Managers Index, considered a good indicator of economic health, climbed to 60.6 in July from 59.5, its highest level since July 2000. It was ahead of the 50 mark separating growth from contraction and a Reuters report estimated the poll of 60.0.

The European broad Stoxx 600 index rose 0.5% and settled for a fourth consecutive day of rise, after falling more than 2% on Monday.

In contrast, the largest MSCI index of Asia-Pacific equities excluding Japan slipped 0.7%, leaving it down 1.4% for the week.

Japan’s Nikkei was closed for a holiday, but down 1.7% for the week and a hair’s breadth down seven months.

The MSCI World Stock Index was flat after three straight days of gains.

Investors were already eagerly awaiting the Federal Reserve’s policy meeting next week where more talk of the cut is expected, although President Jerome Powell has repeatedly said the labor market remains well below target. .

Powell argues that the recent surge in inflation will be short-lived, which could be one of the reasons bond markets have rallied so strongly.

Yields on 10-year US Treasuries rose 1.6 basis points to 1.28%, after hitting a five-month low of 1.128% earlier in the week.

German 10-year bond yields, down 6 basis points this week to -0.41%, held close to five-month lows after the European Central Bank pledged on Thursday not to rise its rates as long as inflation has not durably reached its new 2% target.

“If we see substantive policy measures in the coming months to support the new inflation target, I wouldn’t be surprised to see bond yields fall and market-based inflation expectations rise,” Katharine said. Neiss, Chief Economist for Europe at PGIM Fixed Income. .

The dollar was expected to end the week with small gains after several volatile days where currencies were tossed about by the change in risk appetite.

The dollar index was up 0.2% for the week, edging up Friday to stand at 92.878.

The Russian ruble stabilized ahead of the central bank’s rate-setting meeting, which is expected to end with a sharp hike in interest rates.

Elsewhere, Brent crude oil fell 0.3% to $ 73.57 per barrel, after surging overnight, while U.S. crude also fell a similar amount to $ 71.72 per barrel.

Reporting by Dhara Ranasinghe; Additional reporting by Wayne Cole on SYDNEY; Editing by Ana Nicolaci da Costa


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