Stocks rebound on bargain-buying after inflation-fuelled rout

Bargain-buying Friday helped major markets recover some of this week’s steep losses as investors took heart from a forecast-beating US jobless claims report, despite lingering inflation fears stalking trading floors.

Oil prices recovered after heavy losses a day earlier, while the dollar weakened following recent gains and bitcoin steadied close to $51,000 after a characteristic plunge earlier in the week.

Also read: Wholesale price inflation in US highest since 2010 

Global equities have been convulsed for months by expectations that a blockbuster global recovery will send prices rocketing, forcing central banks — particularly the Federal Reserve — to taper the ultra-loose monetary policies that have helped drive a rally for more than a year.

Also Read | Amid inflation data, Wall Street session suffers massive losses

While central bank officials have been in no rush to change course, investors have been preparing for what they see as the inevitable, selling firms at risk from higher interest rates, such as in the tech sector, and buy those that benefit.

The scorching inflation narrative was reinforced this week with US consumer prices coming in far above estimates on Wednesday, followed by data Thursday showing the wholesale price index at its highest since comparable records began in 2010.

Also Read | Inflation hit US economy to add hurdles in US President Joe Biden’s economic plan

“This bigger-than-expected rise does suggest that we will probably get another two or three months of high inflation prints,” said CMC Markets analyst Michael Hewson.

For Fawad Razaqzada, market analyst with ThinkMarkets, “there is a sense of calm returning to the market with investors happy to buy the dip in the markets of stocks, especially cyclical.”

In its April monetary policy minutes published Friday, the European Central Bank agreed not to react too quickly to rising inflation.

ECB governing council “members generally agreed on the importance of looking through the increase in inflation in the short term — which was expected to be temporary — as well as the heightened volatility expected over the coming 12 months”, according to the minutes. 

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ECB chief economist Philip Lane said “underlying price pressures were subdued in the context of weak demand and significant slack in labour and product markets”.

But they were “expected to increase somewhat in 2021 owing to short-term supply constraints and the recovery in domestic demand,” hence “inflation would exhibit some volatility for the remainder of the year”.

Wall Street and major European indices both had added around 1% shortly after the start of the US session and two hours from the European close while the tech-rich Nasdaq also enjoyed healthy gains.

Also read: US stocks rebound following inflation scare 

While most Asian markets recovered some of this week’s steep losses, Singapore slid nearly 3% amid a spike in COVID infections in the city which put an already once-delayed travel bubble with Hong Kong in doubt.

Elsewhere, crude prices bounced after Thursday’s losses of more than 3%.

New York – Dow: UP 0.9% at 34,326.89

London – FTSE 100: UP 0.9% at 7,029.80

Frankfurt – DAX 30: UP 0.9% at 15,337.05

Paris – CAC 40: UP 1.2% at 6,363.29

EURO STOXX 50: UP 1.1% at 3,997.40

Tokyo – Nikkei 225: UP 2.3% at 28,084.47 (close)

Hong Kong – Hang Seng Index: UP 1.1% at 28,027.57 (close)

Shanghai – Composite: UP 1.8% at 3,490.38 (close)

Euro/dollar: UP at $1.2136 from $1.2085 at 2040 GMT

Pound/dollar: UP at $1.4094 from $1.4054

Euro/pound: UP at 86.11 pence from 85.95 pence

Dollar/yen: DOWN at 109.28 yen from 109.44 yen

Brent North Sea crude: UP 1.5% at $68.11 per barrel

West Texas Intermediate: UP 1.5% at $64.83 per barrel