Stocks extend bear market rebound as inflation worries subside

MILAN / TOKYO (Reuters) – Global stocks extended their rebound on Monday, benefiting from Wall Street’s strong close on Friday as off-peak oil prices helped improve sentiment and allay fears of persistent inflation.

Strong morning gains in Europe and rebound in Asian markets after China eased further restrictions on COVID-19 pushed MSCI global stock indexes (.MIWD00000PUS) Up for the third consecutive session, up 0.5% by 0851 GMT.

Investors hope that the drop in oil prices from three-month highs earlier in June will ease price pressures and allow the US Federal Reserve to tighten policy less sharply than initially expected, reducing the risks of an economic recession.

“We believe there are more opportunities to see oil prices fall simply because of lower demand from the US, Europe and China due to the slowdown in the economy. This in turn should help reduce expectations about inflation at least at the end of this matter,” said Jerome Schop, fund manager at Prime Partners in Geneva.

“The next Fed meeting in July is going to be very important. We should see the Fed continue to raise rates, perhaps by 75 basis points. But the most important will be the new message from (Fed President Jerome) Powell. Maybe he will say that,” Schop added. We are happy with the new level of prices.”

Despite a strong three-day recovery that helped the MSCI World Index extend its distance from the November 2020 lows hit earlier this month, the index is still more than 20% down from a record close in January, a drop touted Usually it is a bear market.

Traders said that excessive market conditions and portfolio rebalancing at the end of the month also contributed to the bounce, although they expected more volatility ahead as second-quarter earnings seasons approach.

MSCI’s broadest index of Asia Pacific shares (.MIAP00000PUS.) It rose 1.6%. Beijing said on Saturday it would allow schools to resume in-person classes and the main party chief in Shanghai declared victory over COVID-19 after the city reported no new local cases for the first time in two months. Read more

Stokes 600 districtwide (.stoxx) The benchmark index added more than 1% as the easing of restrictions in China boosted oil stocks and miners. Meanwhile, US stock index futures extended gains with the S&P 500 e-minis index rising about 0.6%.

Oil was volatile as the market grappled with concerns about an economic slowdown versus concerns about a loss of Russian supplies amid sanctions over the conflict in Ukraine. Read more

Brent prices rose 0.2 percent to $113.36 a barrel, and US West Texas Intermediate crude futures fell 0.1 percent to $107.52.

US 10-year Treasury yields stood just above 3% as traders cleared their bets on increases next year but are still considering a tight tightening this year. They are up 2 basis points at 3.16%, from an 11-year high hit earlier this month.

“The market remains focused on the trade-off between the policy response to high inflation and fears of a hard landing,” Westpac interest rate analyst Damian McCullough wrote in a note.

“There will be ongoing discussions about whether long-term returns have peaked, but we do not yet expect 10-year yields to fall materially or sustainably below 3%,” he added.

The dollar continued to consolidate near its lowest level since the middle of the month against the major currencies, as traders reassessed the prospects for a violent rate hike.

The dollar index – which measures the currency against six rivals – fell 0.2% to 103.82.

Gold rose 0.7% to $1,838.8 an ounce, boosted by news of some Western countries planning to officially ban imports of the metal from Russia for its invasion of Ukraine.

Bitcoin was flat, trading at $21,170.88 after dropping to $17,588.88 earlier this month.

(Reporting by Danilo Masononi, Kevin Buckland and Sam Beford; Editing by Mark Heinrich)

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