Men wearing protective masks use mobile phones in front of an electronic board displaying Japan's Nikkei index outside a brokerage in Tokyo.
SINGAPORE Reuters -- Stocks and bonds were heading for their first weekly gain in a month on Friday, as investors wagered on central banks to bring inflation to heel, but growth fears dragged on commodities.
Copper, a bellwether for economic output with its wide range of industrial and construction uses, dropped 3% in Shanghai and is down more than 7% for the week, its sharpest weekly fall since the pandemic-driven financial markets meltdown in March 2020.
Oil fell overnight, while the benchmark grain prices fell by nearly 9% for the week and at its lowest since March, at $9.42 a bushel, while Brent crude futures are down 2% on the week to $110.62 a barrel. Since energy and food have been the main drivers of inflation, the price of O R GRA has made some relief in equities. After some heavy recent losses, the World Equity Index of MSCI is up 2% on the week.
On Friday, the broadest index of Asia-Pacific shares outside Japan rose 1%, flattered by short sellers bailing out of Alibaba - which rose 5% - amid hints that China's technology crackdown is abating.
Japan rose 0.8% for a 1.6% weekly gain and the S&P 500 futures were flat after the index rose about 1% overnight. The U.S. dollar is just below a two-decade high against a basket of major currencies.
Market worries about an abrupt slowdown are the cause behind recent moves lower in raw materials prices, but lower commodity prices feel like they could be just what the doctor ordered for the global economy, said Brian Daingerfield, NatWest markets strategist.
Concerns that are related to commodity prices are a part of our hard landing fears. Soft data has been blamed for this week.
The U.S. producers reported the first drop in new orders in the past two years in Japan, Britain, the euro zone and the United States in June, with a softer outlook on factory activity in Japan, Britain, and the United States.
Bonds rallied hard on hopes that aggressive rate hikes would have to be curtailed, with German two-year yields down 22 basis points in their biggest drop since 2008, as they hoped that their bets on aggressive rate hikes would have to be curtailed. The GVD EUR The benchmark 10 year Treasury yield fell 7 bps overnight and was steady at 3.0944%. The US dollar has slipped from recent highs, but not too far as investors remain cautious. It was last fairly stable at $1.0529 per euro and bought 134.79 yen. FRX The battered yen has steadied this week and drew a little support on Friday from Japanese inflation topping the Bank of Japan's 2% target for a second straight month, putting pressure on its ultra-easy policy stance.
European Central Bank and Federal Reserve speakers will be watching closely later in the day, as will British retail sales data and German business confidence. The main worry is what it means for company performance.
The earnings outlook hasn't deteriorated so far, and that will further add to concerns of a recession, said Charu Chanana, market strategist at brokerage Saxo in Singapore.