World shares bounce back, shrugging off inflation concerns

Source: Associated Press

World shares bounced back on Friday from losses earlier in the week, shrugging off data showing US wholesale prices soared 11% in April from a year earlier.

Stock market file image.

Gains in Europe and Asia followed a mixed and muted close on Thursday on Wall Street. Oil prices and US futures also were higher.

Investors are puzzling over what’s next with inflation and the US central bank’s response to it. Trading has been volatile, with indexes prone to sharp swings as investors try to shield their portfolios from the impact of the highest inflation in decades.

“Nothing has materially changed in the world from yesterday, and if anything, Russia/Europe risks are increasing. The rally today looks more like a technical rebound after a torrid week, than a structural turn in sentiment. As such, it should be taken with a grain of salt," Jeffrey Halley of Oanda said in a report.

Federal Reserve Chair Jerome Powell, fresh off winning Senate confirmation for a second four-year term, for the first time on Thursday acknowledged that high inflation and weakness in other economies could thwart his efforts to avoid a recession.

Powell had earlier sought to portray the Fed’s efforts to tighten interest rates as consistent with a so-called “soft landing” for the economy.

In Frankfurt, the DAX gained 1.1% to 13,894.26. Britain's FTSE 100 picked up 1.3% to 7,324.04, while the CAC 40 in Paris added 1.2% to 6,281.46. The future for the S&P 500 rose 1.2% while that for the Dow industrials gained 0.8%.

In Asian trading, Hong Kong's Hang Seng index gained 2.7% to 19,898.77 and the Nikkei 225 in Tokyo jumped 2.6% to 26,427.65. South Korea's Kospi added 2.1% to 2,604.24 and in Sydney, the S&P/ASX 200 advanced 1.9% to 7,075.10.

The Shanghai Composite index gained 1% to 3,084.28 and India's Sensex climbed 1.4%.

Central bank moves to fight back against price increases by raising interest rates are pulling some currencies lower while the dollar rises. The Japanese yen has weakened sharply in the past several months, while the Chinese yuan, whose value against other currencies is regulated, has also weakened.

The euro, likewise, has weakened amid the fighting in Ukraine and uncertainty over supplies of Russian gas and oil . The euro was trading at $1.0410 early on Friday, having fallen below the $1.0500 level it had hovered above for most of the week.

“European risk sentiment is getting mangled by news of Russia cutting gas supply in retaliation for sanctions," Stephen Innes of SPI Asset Management said in a commentary.

“EUR (the euro) has crashed through $1.05 and has even broken down through $1.04 on the back of the news. Indeed, this truly highlights the uncertainty as we advance with the threat and disruption of the Russian energy supply," he said.

The dollar was at 128.67 yen, up from 128.42. Against the Chinese yuan, it was at 6.79 per dollar, up from about 6.41 yuan a month ago.