World shares extend rally as oil prices ease

MILAN TOKYO World shares extended their bounce on Monday, building on Friday's strong Wall Street close as off-peak oil prices helped sentiment improve and temper fears of prolonged inflation.

There was a rally in Asian markets and strong morning gains in Europe. The benchmark for global stocks was up for a third straight session, rising 0.5 percent by 0851 GMT.

Investors hope that the oil price drop from three-month peaks hit earlier in June could help ease price pressures and allow the US Federal ReserveFederal Reserve to tighten policy less aggressively than originally feared, reducing the risk of an economic recession.

We think there will be more chances of oil prices going down because of the easing demand from the US, Europe. Jerome Schupp, fund manager at Prime Partners in Geneva said that this should help reduce expectations on inflation at least until the end of the year.

The next Fed meeting in July will be important. We should expect the Fed to hike rates by 75 basis points. The new message from Fed Chair Jerome Powell will be more important. Schupp said he's going to say that they're happy with the new level of rates.

Despite the strong three-day rebound that has helped the MSCI world benchmark distance rise further above the November 2020 lows earlier this month, the index remains down more than 20 percent from its record high in January, a fall that is commonly described as a bear market.

Oversold market conditions and month end portfolio rebalancing also contributed to the bounce, although they said they expected more volatility ahead as the second quarter earnings seasons approaches.

The pan-regional STOXX 600 benchmark added more than 1 percent. The US stock index futures extended their gains by gaining around 0.6 percent of the S&P 500 e-minis.

The market was volatile as concerns over an economic slowdown and worries about lost Russian supply were a concern over an economic slowdown.

Brent prices rose by 0.2 percent to $113.36 a barrel, and the US West Texas Intermediate futures fell 0.1 percent to $107.52.

The US 10 year Treasury yields stood just above 3 percent as traders removed bets for hikes next year, but still pondered about aggressive tightening this year. They were up 2 basis points at 3.16 percent, a new 11-year high they had reached earlier this month.

The market is focused on the trade-off between the policy response to high inflation and the fear of a hard landing, according to Westpac rates strategist Damien McColough.

He said that there will be ongoing discussions as to whether long-end yields have peaked, but we wouldn't expect 10-year yields to fall below 3 percent.

Since the middle of the month, the dollar was close to the lowest against major peers, as traders reassessed the prospects of aggressive rate hikes.

The dollar index, which measures the currency against six rivals, was down 0.2 percent at 103.82.

Gold rose 0.7 percent to $1,838. Some western nations plan to ban imports of metal from Russia, supported by news of 8 per ounce.

The price of the digital currency was flat, trading at $21,170. 88 was 88 after falling as low as $17,588. It was 88 earlier this month.