LONDON, April 8 – European stocks rallied on Friday, but global stocks were still on course for their first weekly loss in four weeks as the prospect of aggressive global interest rate hikes and geopolitical risks rocked investors.
Global risk appetite eased during the week as minutes from the Federal Reserve and European Central Bank showed policymakers are poised to step up efforts to contain inflation.
As of 08:11 GMT, the MSCI World Stock Index (.MIWD00000PUS), which tracks stocks in 50 countries, was up 0.2% but down 1.3% on the week and on course for its first weekly loss in four.
The pan-European STOXX 600 (.STOXX) rose 1.3% as markets caught up in Europe, with a modest rebound on Wall Street on Thursday.
Eddie Cheng, head of international multi-asset portfolio management at Allspring Global Investments, said Friday morning’s move higher in European equities was “probably just a small respite” from the week’s downtrend, but investors were still preoccupied with rate hikes by the Fed and the war in Ukraine.
“Uncertainty is not decreasing, it is even increasing,” he said, pointing to new sanctions against Russia. The European Commission proposed new sanctions against Russia on Tuesday, including a ban on the purchase of Russian coal. Continue reading
Risk from the French presidential election was apparent in bond markets as borrowing costs in France rose relative to a broader fall in core European government bond yields.
Investors are concerned about the risks that far-right candidate Marine Le Pen could beat incumbent President Emmanuel Macron.
“A Macron victory would be welcomed by markets as markets would price in decreasing political uncertainty and a continued business-friendly administration,” said Lale Akoner, senior market strategist at BNY Mellon Investment Management.
A Le Pen victory, while still unlikely, is within margin of error ahead of Sunday’s first round of voting, opinion polls show. Continue reading
The spread between French and German 10-year yields was 54.5 basis points, near its highest level since April 2020.
In US bond markets, longer-dated Treasuries bore the brunt of this week’s selling as traders see the long end being hit hardest by the Fed’s slashing of their bond holdings.
The benchmark 10-year yield is up almost 27 basis points to 2.6584% this week but was steady in early European trade.
The US dollar was the main beneficiary of rising US yields, and the dollar index was higher for a seventh straight day and on course for its best week in five.
The stronger dollar has put pressure on the euro and the struggling yen. The Japanese currency was near its lowest in years, struggling at 124.00, while the euro fell to its lowest since March 7 at $1.0848.
Brent crude futures edged higher after previously falling below $100 a barrel. US crude oil futures rose 0.8% to $96.76 a barrel.
Gold was little changed at $1,931 but was expected to post a 0.3% gain on the week.
Major cryptocurrencies posted small gains as Bitcoin traded at $43,813, although it was still on track for its second straight weekly decline.
World stocks
Reporting by Samuel Indyk and Elizabeth Howcroft; Editing by Nick Macfie