Investors hide inflation fears to renew equity bets

  • Dollar close to three-year high against yen
  • The FTSE 100 recovers all the ground lost in the pandemic
  • Oil prices return to near multi-year highs
  • Bitcoin at six-month high, close to record
  • Goldman Sachs earnings, US retail sales expected

LONDON, Oct. 15 (Reuters) – Shares rose on Friday, buoyed by strong corporate results, but high oil prices and slowing car sales in Europe served as a reminder of headwinds for the global economy.

The STOXX index (.STOXX) of 600 European stocks rose 0.2% to three-week highs. The UK’s FTSE 100 (.FSTE) also gained 0.2%, as the UK blue chip index recovered all of the ground lost since the coronavirus pandemic began in March of last year.

“There is an element of appeasement. Markets are trying to determine if inflation is transient, if supply chain disruptions are going to translate into higher costs,” said Mike Hewson, chief market analyst. at CMC Markets.

“But this week’s earnings from various companies allay some concerns that companies won’t be able to pass some of these cost increases on to consumers, and that’s why we’re seeing an increase in risk,” said Hewson.

Strong earnings from major US banks on Thursday – with more of the same expected from Goldman Sachs (GS.N) later on Friday – helped the S & P500 index on Wall Street register its biggest daily percentage increase since early March and send off of European lenders (.SX7P) higher at the start of the session.

The return of optimism in the markets will be tested, however, by weaker growth data expected from China next week and the impact of strengthening oil prices on consumers as the months approach. winter, Hewson said.

European car registrations fell by more than a quarter in September, and Toyota Motor Corp (7203.T) announced it would cut global production in November, as chip shortages and supply chain issues continued to weigh on the sector.

Investors were also trying to determine where bonds went next after 10-year Treasury yields hit 10-day lows, hoping for a direction from expected US retail sales figures later today.

“With no strong case for either direction and many investors likely to be sitting on a dismal performance as major bond indices have been in the red since the start of the year, return volatility is expected stay high in the coming months, ”UniCredit told clients. in a note.

Asian stocks edged higher on Friday, building on Wall Street’s positive lead, although concerns about the Chinese economy limited gains.

Fund Flows to Global Equity Bonds and Money Markets


Oil prices have hit multi-year highs, a drag on the growth of energy-importing markets in North Asia, but good news for some energy-exporting markets in Southeast Asia.

US crude rose 1% to $ 82.13 a barrel, back near Monday’s seven-year high of $ 82.18. Brent crude rose 1% to $ 84.88 a barrel, around its three-year high on Monday.

Bitcoin hit a six-month high of $ 60,000 on Friday, approaching the April record, as traders grew increasingly confident that U.S. regulators would approve the launch of an exchange-traded fund based on its futures contracts. Read more

The largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) gained 1.1% and was forecast for a weekly gain of 1.7%, which would be its best weekly performance since early September, while Japan’s Nikkei jumped 1.81%, led by tech stocks. .

Analysts largely attributed the gains in Asia to the US rally.

US stocks rose overnight after data showed lower new jobless claims, lower than expected ex-factory price inflation and better-than-expected results for the four largest consumer banks American. Read more

“The stagflation story has had cold water,” said Kyle Rodda, analyst at IG Markets.

Chinese stocks rose more cautiously than elsewhere with blue chips (.CSI300) up 0.43% ahead of next week’s growth figures.

“We expect GDP growth to slow to 4.6% yoy in the third quarter from 5.6% previously, given continued weakness in consumption and services amid repeated outbreaks of COVID , and erasing the weak base from the previous year, ”Barclays analysts said in a note.

In forex markets, the dollar again hit an almost three-year high against the yen, with the dollar buying 114.12 yen, the highest since late 2018.

The dollar index, which measures the greenback against a basket of currencies, was down slightly on that day, at 93.89 and poised for its first weekly decline against its major peers since the start. last month, after losing some ground on the pound sterling and the euro. .

The benchmark 10-year Treasury yield was 1.5458%, slightly higher on the day, following a downtrend this week from Tuesday’s four-month high of 1.631%.

Bitcoin on the rise

Reporting by Huw Jones, additional reporting by Alun John; Editing by Muralikumar Anantharaman, Sam Holmes and Susan Fenton

Our standards: Thomson Reuters Trust Principles.

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