Markets lower inflation expectations as copper slips By Reuters

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© Reuters. FILE PHOTO: Men wearing protective masks amid the coronavirus (COVID-19) outbreak use cell phones in front of an electronic sign displaying Japan’s Nikkei index outside a real estate agency in Tokyo, Japan June 16, 2022. REUTERS/Kim Kyung-Hoon

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By Carolyn Cohn and Tom Westbrook

LONDON/SINGAPORE (Reuters) – Global stocks and US benchmark bonds were heading for their first weekly gains in a month on Friday, with economic growth concerns tempered by the idea that falling and different commodity prices could curb runaway inflation.

The week was marked by sharp declines for commodities amid concerns that the global economy looks shaky and that rate hikes will hurt growth – in turn prompting traders to lower inflation expectations and scale back some bets on the magnitude of the hikes.

“Inflation will remain high and above target, but it is increasingly likely to peak in the coming months,” said Andrew Hardy, investment manager at Momentum Global Investment Management.

“Markets could absorb that pretty well — there’s potential for recovery later in the year.”

Copper, a model of economic output with its wide range of industrial and construction applications, is headed for its strongest weekly decline since March 2020. It fell on Friday in London and Shanghai, falling more than 7% on a weekly basis.

Tin fell 9.7% to $24,380 a tonne, the lowest since March 2021 and on track for a weekly percentage decline of nearly 22%, the largest on record.

futures fell more than 3% weekly to $109.70 a barrel and fell 10% for the month, while benchmark grain prices fell, with Chicago wheat above 8% for the week. [O/R][GRA/]

Gold rose 0.29% to $1,828.50 an ounce, but was heading for a second consecutive weekly decline.

The declines provided some relief for equities, as energy and food were the main drivers of inflation. After heavy recent losses, the MSCI World Equities Index rose 0.3% on the day and 2.4% this week, poised for its first weekly gain since May.

The US rose 0.7% after Wall Street’s major indices posted solid gains on Thursday. [.N]

European equities were up 0.82%, on track to record small weekly gains. rose 0.73% and also showed a small increase on the week.

“While market concerns about an abrupt slowdown are the culprit behind the recent declines in commodity prices, lower commodity prices feel like they are just what the doctor ordered for the global economy,” said NatWest market strategist Brian Daingerfield.

“So much of our hard landing fears are related to commodity price concerns.”

The Federal Reserve’s commitment to curb 40-year high inflation is “unconditional,” US central bank chief Jerome Powell told lawmakers on Thursday, acknowledging that sharply higher interest rates could push up unemployment.

Germany is heading for a gas shortage if Russian gas supplies remain as low as they are today due to the conflict in Ukraine, and certain industries would have to shut down if there isn’t enough in winter, Economy Minister Robert Habeck told Der Spiegel magazine about Friday.

German business morale fell more than expected in June.

Bonds rebounded hard in hopes that bets on aggressive rate hikes should be curtailed, with German two-year yields falling 26 basis points on Thursday, the biggest drop since 2008.

German 10-year yields fell 4 bps on Friday after dropping 29 bps on Thursday, heading for its first weekly decline since mid-May. [GVD/EUR]

The benchmark held steady at 3.0666% after dropping 7bp on Thursday and [US/]

Bond funds suffered their largest outflows since April 2020 in the week to Wednesday, as stocks lost $16.8 billion as markets were locked in maximum bearish mode, BofA’s weekly analysis of flows on Friday showed.

The US dollar has fallen from its 20-year high last week. It held steady at $1.0529 per euro and fell 0.2% to 134.67 yen. [FRX/]

The battered yen has stabilized this week and received some support on Friday from Japanese inflation which surpassed the Bank of Japan’s 2% target for the second straight month, putting more pressure on its ultra-easy stance.

MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 1.1%, helped by short sellers who Ali Baba (NYSE:) — which rose nearly 6% — amid hints that China’s tech crackdown is waning.

rose 1.2% for a weekly gain of 2%.

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