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LONDON/SHANGHAI: World stocks rose from the previous day’s 18-month lows and the dollar pulled back from 20-year highs on Friday, though investors remained nervous about high inflation and the impact of rising interest rates.
Markets are becoming anxious about the possibility of recession, with the S&P getting close to a bear market on Thursday, at nearly 20% off its January all-time high.
In an interview late on Thursday, U.S. Federal Reserve Chair Jerome Powell said the battle to control inflation would “include some pain”. Powell repeated his expectation of half-percentage-point interest rate rises at each of the Fed’s next two policy meetings, while pledging that “we’re prepared to do more”.
The war in Ukraine has aggravated supply chain disruptions and inflationary pressures already in place after more than two years of the COVID-19 pandemic, but stocks enjoyed a bounce on Friday.
“There’s an awful lot of negative sentiment out there, we’re looking at a 40% chance of recession,” said Patrick Spencer, vice chairman of equities at Baird Investment Bank.
“A lot of fund managers have cut their equity allocations and raised cash, though we think this is a correction rather than a bear market.”
MSCI’s world equity index rose 0.32% after hitting its lowest since November 2020 on Thursday, though it was heading for a 4% fall on the week, its sixth straight week of losses.
S&P futures bounced 1.13% after the S&P index dropped 0.13% overnight, with the index also eyeing a sixth straight week of declines.
European stocks rallied 0.96% and Britain’s FTSE 100 gained 1.17%.
The U.S. dollar eased 0.22% to 104.54 against a basket of currencies , but remained close to 20-year highs due to safe haven demand.
Russia has bristled over Finland’s plan to apply for NATO membership, with Sweden potentially following suit.
