World stocks set for first consecutive weekly gains in 2022
March 25 (Uncertain Times) – Global equities headed for a second straight week of gains in 2022 for the first time, although sentiment was broadly cautious as markets assessed economic risks from the Federal Reserve’s monetary tightening and Russia’s war in Ukraine.
Technology stocks in Hong Kong (.HSTECH) led the losers and weighed on the broader market after US regulators dismissed recent media speculation about an imminent deal that would prevent hundreds of Chinese companies from being delisted from American stock exchanges designated as “premature”.
Although global flash PMI data for March this week showed the global economy was broadly resilient, investors have turned increasingly bearish on the economic outlook. Barclays, for example, cut its forecast for global economic growth to 3.3% this week, while traders have increased their short bets.
Global bond markets were still in the grip of one of the worst sell-offs in recent history, while indicators of market volatility were sending mixed signals. Nickel, the face of market volatility, rose 9% on Friday after hitting the 15% daily trading limit in the previous two sessions.
I think the end of the quarter and fiscal year in Japan next week will provide a clearer reading of risk asset and currency resilience to the bond bear market and the prospect of accelerated Fed tightening in May,
Kenneth Broux said, a foreign exchange strategist at Societe Generale in London.
Benchmark yields for 10-year US Treasuries, which have led the broader bond market’s sell-off, remained at 2.34% on Friday after hitting a nearly three-year high of over 2.41% this week. Yields are up 75 basis points over the past two weeks as traders have struggled to revise rate hike expectations.
While Treasuries remained on track for one of their worst quarterly declines since at least the early 1970s, the dollar benefited from the widening interest rate differential, with the Japanese yen briefly plunging to a low of 122 yen per dollar in late 2015.
The broader dollar index paused for breath on Friday but was on course for a small weekly gain.
Markets expect up to 190 rate hikes for the rest of the year after a 25 basis point US rate hike last week. Investors assign an 88% probability of a 50 basis point rate hike in March.
Chicago Fed President Charles Evans was the latest US policymaker to sound more dovish when he said Thursday the Fed must raise rates “in time” this year and in 2023 to curb high inflation before then it is embedded in US psychology and balanced becomes harder to get rid of.
Demand for safe haven assets such as gold and the Swiss franc remained resilient as the conflict in Ukraine showed no signs of slowing down. Ukrainian troops are retaking towns east of the capital, Kyiv, and Russian forces that tried to take the city are drawing on their overstretched supply lines.
Spot gold stayed elevated at $1,959 for an ounce, steady for the day.
Overnight, the top three US stock indices rose more than 1% each, as investors bought struggling shares in chipmakers and big growth stocks, bolstered by a fall in oil prices.
Oil prices continued to slip a bit on Friday as the United States and its allies considered releasing more oil from inventories to cool markets. Brent crude fell 1.3% to $117.78 a barrel and US crude fell 1.6% to $110 a barrel, but prices were still very high by historical standards.
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