Global equity markets rose strongly on Friday while US Treasury bond yields fell as investors continued to bet on interest rates not rising as much as previously feared because inflation may be peaking.
Market confidence that US inflation had topped out was boosted by data showing a slowdown in consumer and producer prices in July following in the wake of the Federal Reserve’s rapid fire rate rises.
The MSCI world equity index, which tracks shares in 50 countries, was up 0.25% on Friday while Europe’s STOXX 600 index gained 0.16% for the day and 1% for the week.
US Treasury yields were weaker as traders wondered about a moderation of the Fed’s monetary policy stance. Benchmark 10-year Treasury bond yields dipped to 2.83%, after reaching 2.902% on Thursday, the highest since July 22.
The Dow ended up 424.38 points, or 1.27%, to close at 33,761.05. The S&P 500 added 1.73% to finish at 4,280.15, and the Nasdaq surged 2.09% to 13,047.19.
For the week, the S&P 500 was up 3.26% on the week, its longest weekly winning streak since November 2021. The Dow was up 2.92% for the week, while Nasdaq was up 3.08%. For the Nasdaq, it was also the fourth positive week in a row.
Last week’s rise extended the rebound since the lows of mid-June. The S&P 500 is up 16.7% since those lows, and has cut its losses from the peak in half.
The Dow has added nearly 13% and the Nasdaq has leapt 22.6% as investors have gotten all confident (again) in tech stocks with the belief that the pace of rate rises from the Fed will slow in coming months.
The ASX 200 fell by 0.38% on Friday to be up 0.24% for the week. The Index is up 9.3% since the lows of mid-June.
The overnight futures market rose 39 points on Friday night, our time, meanings the ASX will open solidly this morning as investors face up to the first of the busy final two and a bit weeks of the June 30 reporting period.
Bond yields generally rose as the fall in yields in prior weeks had gone a little too far too fast. Oil prices rose partly due to US supply disruptions and increased demand forecasts.
Metal prices also rose. The $A rose well past 71 US cents as the $US fell.
The Aussie dollar ended at 71.25 US cents, up more than 2 US cents from 69.14 cents close the previous Friday.
US bond yields ended at 2.83%, unchanged from the previous week but analysts point out that the yield curve remains inverted (short term rates are higher than longer term rates) which suggests investors still see a a strong chance of a recession or a sharp slowing in growth.
The debate about rates was changed by the flat consumer price index in July from June in large due to falling petrol prices. The producer price index showed a surprise month on month decline last month while on Friday, import prices also fell more than expected due to falling prices for oil and oil products.
These outcomes saw economists, analysts and investors step up their talk about ‘peak inflation’ in the US.
