Global Stocks Head for Best Month Since Late 2020, Dollar Falls

LONDON/SINGAPORE, July 29 (Reuters) – Global stocks rose on Friday, on track for their best month since late 2020, as traders bet the weakening U.S. economy could slow the pace of monetary tightening in the the world’s largest economy, while the dollar struggled overall. against his rivals.

As inflation rises in major markets and central bankers scramble to raise rates without killing growth, riskier markets like stocks have tended to react positively to any weakening of confidence from policymakers. .

After Thursday’s data showing a second-quarter contraction in the US economy helped push US markets higher, European stocks shrugged off weakness in Asian markets overnight to gain at the open. .

Futures are now predicting that US interest rates will peak in December markets this year compared to June 2023 in early July and the Federal Reserve will cut interest rates by almost 50 bps next year to support slowing growth. [0#FF:]

The MSCI World Index (.MIWD00000PUS) rose 0.3% for the last time, on track for a monthly gain of close to 6%, its best level since November 2020, buoyed by broad gains in European markets, with the STOXX Europe 600 (.STOXX) 0.8% more

US stocks look poised to gain later in the session, with S&P 500 and Nasdaq futures rising 0.7% and 1.4%, respectively, buoyed in part by strong overnight gains. from Amazon. (AMZN.O) and apple (AAPL.O).

Despite the positive end of the month for stocks, Mark Haefele, chief investment officer at UBS Global Wealth Management, said investors should proceed with caution.

“In the near term, we believe the risk-reward relationship for broad equity indices will be moderate. Equities are trading on a ‘soft landing,’ but the risk of a deeper ‘slump’ in economic activity is high.”

Some of that concern was evident in Asian stock markets overnight, after Beijing dropped reference to its full-year GDP growth target after a high-level Communist Party meeting. read more

MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.3%.

News from the previous session that US gross domestic product had contracted 0.9% last quarter, to add to a 1.6% contraction in the previous quarter, weighed on yields. country bonds and the dollar, with both remaining dovish on Friday.

The weakness came despite the Federal Reserve delivering an aggressive 75 basis point interest rate hike on Wednesday, the third this year. read more

The benchmark 10-year Treasury yield recovered slightly from its overnight lows to 2.6975%, while the two-year bond yield, which normally moves in step with interest rate expectations interest, was 2.8500%.

The dollar last fell 0.5% against a basket of its major peers but still on track for a second month of gains, leaving the yen looking for its best month in two years as falling yields on the US Treasury weighed on the dollar.

In Europe, Germany’s 10-year bond yield, the benchmark for the euro zone, rose nearly 5 basis points in early trading to 0.85%, but that leaves it down 50bps on the month, on track for its weakest performance since 2010.

Among commodities, US Brent crude and West Texas Intermediate crude futures rose 1.3%-1.7% as concerns over supply shortages ahead of the next oil ministers meeting OPEC almost offset doubts about the economic outlook.

Gold extended overnight gains to trade 0.6% at $1,765 an ounce, helped by dollar weakness.

Additional reporting by Tom Westbrook; Edited by Richard Pullin, Sam Holmes and Angus MacSwan

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