Stocks and bonds were headed 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 industries and construction uses, fell 3% in Shanghai and fell 7% for the week, its sharpest weekly fall since the pandemic-driven financial markets meltdown in March 2020.
Oil fell overnight, while Brent crude futures are down 2% to $110.62 a barrel, while benchmark grain prices fell, with Chicago wheat falling nearly 9% for the week and its lowest since March at $9.42 a bushel.
Since energy and food have been the drivers of inflation, the price falls have made for some relief in equities. After some heavy recent losses, the World equities index of MSCI is up 2% on the week.
On Friday, the broadest index of Asia-Pacific shares outside Japan rose by 1%, flattered by short sellers bailing out of Alibaba - which rose 5%, amid hints that China's technology crackdown is abating.
Japan's Nikkei rose by 0.8% for a 1.6% weekly gain and S&P 500 futures were flat after the index rose about 1% overnight. The US dollar is just below a two-decade high against a basket of major currencies.
Market worries about an abrupt slowdown are the reason 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.
Many of our hard landing fears relate to concerns that are linked to commodity prices. Soft data has been blamed for this week.
In June, factory activity in Japan, Britain, the euro zone, and the United States all softened with the US producers reporting the first drop in new orders in two years in the face of slumping confidence.
Bonds rallied hard on hopes that the bets on aggressive rate hikes would have to be curtailed, with German two-year yields falling 22 basis points in their biggest drop since 2008, as a result of the German two-year yields dropping 22 basis points in their biggest drop since 2008.
The benchmark 10 year Treasury yield fell 7 bps overnight and was steady at 3.0944%.
The US dollar has fallen from recent highs, but not too far as investors remain cautious. It was last fairly steady at $1.0529 per euro and bought 134.79 yen.
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.
The 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 concern is what it means for company performance.
In the second quarter, earnings reports will send shockwaves to the market, as the earnings outlook hasn't deteriorated materially so far, and that will further increase concerns for a recession, said Charu Chanana, market strategist at brokerage Saxo in Singapore.