As growth concerns damage commodities, battered stocks Rise

On Friday, expectations that falling commodity prices will help slow down runaway inflation helped soothe fears about growth, sending global equities and bonds on their way to their first weekly rise in a month.

In response to signs that China’s technology crackdown is easing, short-sellers bailed out of Alibaba (NYSE: BABA), which increased by over 7 percent; it helped MSCI’s broadest index of Asia-Pacific equities outside of Japan rise 1.4 percent on Friday. S&P 500 futures increased overnight gains by 0.76 percent as Japan’s Nikkei gained 1.2 percent for a 2 percent weekly gain. Futures for the FTSE and EuroSTOXX 50 both increased by 1% and 0.6%, respectively. On concerns that the global economy is fragile and that interest rate rises will slow growth, commodities have experienced sharp falls this week. As a result, traders have reduced their bets on the extent of rate hikes.

Largest Decline Since 2020

With its numerous industrial and construction uses, copper is a leading indicator of economic activity. It is currently on pace for its largest weekly decline since March 2020. It decreased on Friday in Shanghai and is down nearly 8% for the week.

A weekly loss for oil is also anticipated. Benchmark grain prices fell; Chicago wheat went down more than 8% weekly; meanwhile, Brent oil futures are down 2.5 percent per week to $110.35 a barrel. Since energy and food have been the main causes of inflation, the declines have provided some respite for stocks. MSCI’s World stocks index is up 2.3 percent this week, setting it up for the first weekly gain since May after recent steep losses.

Market concerns about an abrupt recession are to blame for recent swings downward in raw material prices; hence, NatWest markets strategist Brian Daingerfield said that lower commodity prices do feel like they may be precisely what the global economy needs.