US stocks rise as survey indicates declining inflation expectations

US stocks rose on Friday, ending an upbeat end to a disappointing week, as strong retail sales data and a survey suggesting inflation expectations eased concerns about the economic outlook.

The S&P 500 stock index ended the day 1.9 percent higher, but still down nearly 1 percent for the week. The technology-focused Nasdaq Composite is up 1.8 percent, but down 1.6 percent for the week.

The European stock index Stoxx 600 closed up 1.8 per cent.

International benchmark Brent crude, which fell on Thursday to levels last seen before Russia’s invasion of Ukraine, added 2.1 percent to settle at $101.16 a barrel. There was little reaction in late afternoon dealings to US President Joe Biden’s speech during His trip to Saudi Arabia.

Friday’s data showed US retail sales rose 1 percent month-on-month in June, topping economists’ expectations for a 0.8 percent gain. Separately, the University of Michigan is closely watching Consumer Confidence Index He noted that medium-term inflation expectations have fallen to a one-year low of 2.8 percent.

Debate has gripped markets in recent months over whether the US economy is strong enough to withstand sharp interest rate increases by the Federal Reserve in response to severe inflation, after downbeat business surveys cast a shadow over the outlook. The S&P is down more than 19 percent for the year.

“The consumer is still spending money, they are still confident, there is still pent-up demand,” said Ron Temple, head of US equities at Lazard.

However, he warned that this could confirm the US central bank’s intention to tighten monetary policy, as retail sales figures showed that “interest rate hikes so far have had no effect” in terms of cooling demand.

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The Fed futures markets tend to raise the key rate on its funds to about 3.5 percent by February, from a range of 1.5 percent to 1.75 percent at present. US consumer prices rose at an unexpectedly fast annual rate of 9.1 per cent in June.

The weak Chinese GDP report also sparked some upside on Friday, fueling speculation that Beijing will do so UNLEASH HUNDRED BILLIONS OF DOLLARS of additional stimulus funds to boost growth.

The world’s second-largest economy expanded 0.4 percent on an annual basis in the three months to the end of June, less than the 1.2 percent economists had expected and down from the 4.8 percent recorded in the first quarter.

We think these kinds of numbers are going to get stronger [the Chinese government’s] “We are determined to drive more stimulus for the rest of the year and that matters globally as well,” said Hani Reda, multi-asset fund manager at Bain Bridge Investments.

Hong Kong’s Hang Seng fell 2.2 percent on Friday, but fell 6.6 percent for the week in its biggest weekly drop since March 2020.

In the US Treasury markets, the yield on the benchmark 10-year Treasury bond fell 0.03 percentage point at 2.93 percent. That yield, which supports debt prices around the world, fell from about 3.5 percent a month ago as recession fears fueled demand for low-risk government debt instruments. Bond yields fall as prices rise.

The two-year Treasury yield traded at 3.12 percent in the so-called inverted yield curve pattern that historically preceded recessions.

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Despite dropping 0.4 percent on Friday, the dollar index, which measures the greenback against six others, posted its third consecutive week of gains as the specter of a growing recession pushed investors into safe-haven assets.

The euro rose 0.6 percent to $1,008, after Dropped to less than 1 dollar earlier this week for the first time in 20 years.

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