US futures rise after China's lending rate cut, but global stocks head for a record losing streak thanks to grim economic outlook
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- US stock futures rose on Friday, but the overall backdrop showed a decline in investor confidence.
- China cut a key lending rate to ward off harm to its economy, sending Asian stocks higher on the day.
- An index of global shares headed for a seventh straight weekly loss, its longest losing stretch ever.
US stock futures rose Friday, buoyed by China cutting a key lending rate, although an index of global equities headed for a record-breaking streak of weekly losses as the outlook for the economy grew increasingly bleak.
Futures on the S&P 500 and Dow Jones rose around 1% in early European trading, while those on the Nasdaq 100 gained 1.5%. The benchmark indices are set for a 3% decline this week, with the S&P 500 on the verge of entering official bear-market territory.
Equity bulls hoping for a sign that the Federal Reserve might offer words of comfort had to digest Kansas City Fed President Esther George's comments Thursday on recent market volatility, which she said was "not surprising".
George said in an interview with CNBC that Fed policy isn't aimed at stock markets, though these are "one of the avenues through which tighter financial conditions will emerge".
"So no sign yet of the Fed being unhappy about tighter financial conditions so far, and markets are continuing to fully price in two further 50-basis point moves from the Fed in June and July," Deutsche Bank strategist Jim Reid said.
"Nobody said getting inflation back to target from such lofty levels would be easy. So if you're looking for a Fed put, it may take a while," he added, referring to the belief the central bank will step in to support falling markets.
Meanwhile, the MSCI All-World index of global shares rose 0.5%. But it's heading for a seventh consecutive weekly loss, the longest since its inception in 2001.
Asian markets got a boost from signs of monetary policy easing in China on Friday. The CSI 300 was up almost 2% on the day, while the Hang Seng gained nearly 3%.
The People's Bank of China made a historically large cut to its five-year loan prime rate, used to price mortgages, as it attempts to shore up the property sector and protect its economy from further damage from COVID-19 lockdowns.
But inflation and its likely impact on the broader economy remained front and center.
Consumer inflation in Japan topped 2% for the first time in over seven years. In Europe, German wholesale inflation hit record highs for a fifth month in a row in April, although the pan-regional STOXX 600 echoed the broader push higher in global equities and rose 1.1%.
On Thursday, data showed initial US jobless claims rose to their highest since late January in the latest week. Also, a key reading of manufacturing activity in the Mid-Atlantic region fell to two-year lows in early May, although a sub-index of prices pressures showed a slowdown.
The dollar, which hit its highest in 20 years this month, gained 0.1% on the day, but was still facing its biggest weekly loss since late January in light of weakening economic data.
"Not until the Fed pours cold water on tightening expectations should the dollar build a top. And yesterday Fed hawk, Esther George, said that even this 'rough week' in equity markets would not blow the Fed off course," ING head of global markets Chris Turner said.
Oil, which can act as a barometer of economic sentiment, eased as traders took profit on a steep rally the previous day. Crude futures have gained 45% so far this year, propelled by an expectation that global supply will fall short of demand, particularly if more countries ban imports of Russian oil.
With inflation starting to dent growth, the oil demand outlook is looking less rosy. The International Energy Agency, which two months ago forecast an energy-price shock this year, said in its monthly report last week that slowing demand and rising supply will stop the market moving into deficit this year.
Brent crude was last down 0.4% at $111.63 a barrel, while WTI futures dipped 0.5% to $109.33 a barrel.
from Business Insider https://ift.tt/69FuTfn
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