On Friday, Wall Street was set for a higher open, while world stocks were on their way to recording their first weekly advance in over a month. Investors were hoping that the runaway inflation could hit a pause due to a decline in copper prices and that of other commodities.
Steep Declines for Commodities
Commodities have recorded steep declines this week on worries that there is a slowdown in the global economy and that growth will dampen due to aggressive interest rate hikes. This had driven traders to pull back on their expectations regarding inflation and they have also cut down the expected interest rate hikes in the future.
Market analysts said that even though inflation would remain high and significantly above target for the next while, but there were chances that it was finally coming close to a peak and would get there in a couple of months. They said that this was acceptable for markets because this left some room for recovery towards the end of the year.
Equities Climb, Commodities Fall
There was a 0.9% gain in the US S&P futures, while the MSCI index of global shares also went up on the day by 0.5% and recorded gains of 2.5% for the week. This put it on course for the first weekly gain it has seen since the previous month.
Since copper has a wide range of uses in construction and industries, it is considered an economic output bellwether. The metal is on course for its biggest weekly drop after March 2020. On Friday, it declined in Shanghai and London and has already lost more than 7% this week.
On Friday, tin had come down by almost 15%, which took its losses for the week to a record high of 25%. Investors were worried that demand for the metal would decline because of fears over slowing economic growth, which is used in electronics for soldering purposes.
Friday prices of Brent crude futures had reached $111.28 per barrel, but were still 2% lower in the week and 10% lower in the month. There was also a decline in benchmark grain prices, as there was a more than 8% fall in Chicago wheat. A 0.2% rise in gold was recorded at $1,826.30, but it was also on course for recording its second consecutive weekly decline. Equities have been relieved by the price drops, as food and energy had been driving inflation.
European Stocks Climb
There was a 1.5% rise in European stocks on Friday, which would lead to small gains for the week. Meanwhile, a 1.3% gain in the UK FTSE 100 index was also recorded for the day and the index also saw gains in the week. Market analysts said that long-term investors should consider the story unchanged. The valuations are more attractive during falling markets in terms of high-quality firms that have a competitive edge in the market. Meanwhile, the US Fed remains committed to its ‘unconditional’ fight against inflation, acknowledging that a recession is one of the possibilities.