Global Market: Stocks, Oil and Dollar Hold Week's Gains Ahead of US Inflation Data

KONTAN.CO.ID - LONDON. Global shares stood their ground on Friday after Wall Street scaled new heights, with looming U.S. inflation data set to help investors update their bets on interest rate cuts and steer the dollar's direction.

The greenback headed for a fourth weekly gain on Friday, pushing the yen to a 10-month low, as traders dialled back bets on how quickly the Bank of Japan might raise interest rates and how soon the Federal Reserve will cut them.

Oil was on track for weekly gains of about 5%, the market watching events in the Middle East after Israel rejected a ceasefire offer from Hamas.

The MSCI All Country stock index was little changed, and up 2.5% for the year.

The mood in stocks was buoyed by Wall Street, where the S&P 500 index rose above 5,000 points for the first time ever on Thursday, capping a 21% surge since October.

In Europe, the STOXX index of 600 companies was flat.

Stocks were underpinned by a rethink of last year's narrative that the chances of a soft landing for the economy in 2024 were limited, said Eren Osman, managing director of wealth management at Arbuthnot Latham.

"The difficulty though for investors at this stage is to take outright long positions, and I think that's the conundrum you face," Osman said.

He has increased exposures to European stocks, whose valuations look more appealing than Wall Street after its heady run.

"But I wouldn't be short of the Magnificent Seven right now," he added, a reference to big U.S. tech stocks that account for about 30% of the S&P's value.

On the data front, inflation in Germany, Europe's biggest economy, eased in January to 3.1%, adding fuel to bets on when this year the European Central Bank will begin easing rates.

Euro zone bond yields hit multi-week highs after several ECB rate setters warned against easing monetary policy too early.

"Indeed, it seems pretty clear now that the ECB will be waiting for European wage data statistics at the end of April before likely cutting rates in June," ING bank said in a note to clients.

S&P stock index futures were slightly weaker ahead of Wall Street's open, with U.S. inflation revisions later on closely watched for any sign that market assumptions that price pressure is in retreat needs re-calibration.

"It sounds like something only economics boffins are interested in but last year the revisions were big enough to make the U.S.'s inflation momentum stronger than first thought," said Corpay currency strategist Peter Dragicevich in Sydney.

"There is a risk this occurs again."

Japan Shares at 34-year high

Japanese shares hit 34-year highs on Friday while adjustments to interest rate expectations sent the yen to a two-month low.

In China, mainland markets were closed and Hong Kong traded thinly and shut early, with the Hang Seng down 0.8% amid nerves authorities may not deliver on promises for support.

"I am betting that (decisive action) is happening," said Chi Lo, senior markets strategist for Asia Pacific at BNP Paribas Asset Management.

Japan's Nikkei, which has been receiving a gush of foreign inflows as investors flee China, rose 0.3%, aided by a retreating yen that traded at its weakest in more than two months at 149.43 per dollar.

Nissan shares collapsed almost 12% for their largest fall in decades after the automaker cut its outlook on slumping China sales.

In commodities, Brent crude futures were at $81.77.

Two-year U.S. Treasury yields are up about eight basis points (bps) this week to 4.465%.

Ten-year yields seem to have settled above 4% and were steady at 4.165% on Friday, up about 12 bps this week. Bitcoin is up 8.6% on the week to $46,540.