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World stocks perk up as volatile week ends on high note

World stocks markets perked up on Friday after a volatile week in which sentiment over the global economic outlook waxed and waned with each new headline on the Delta variant of the coronavirus.

World stocks perk up as volatile week ends on high note

A photographer takes pictures of traders before the opening of the German stock exchange in front of the empty DAX board, at the stock exchange in Frankfurt, Germany, June 24, 2016. REUTERS/Staff/Remote/Files

LONDON: World stock markets perked up on Friday after a volatile week in which sentiment over the global economic outlook waxed and waned with each new headline on the Delta variant of the coronavirus.

Upbeat earnings helped lift European equities, while U.S. stock futures rallied in a positive sign for the Wall Street open. But Asian shares outside Japan were lower as COVID anxiety continued to take a toll.

Financial markets have swung from one direction to another this week as investors try to assess what the surging Delta variant means for the world economy.

After recording its steepest one-day drop since May on Monday, the S&P 500 stock index went on to post the biggest one-day jump since March a day later. It was set to end the week higher. Currency, bond and commodities markets have seen similar gyrations.

"Equity markets are signaling some symptoms of being tired after a long rally and recognise the peak growth environment," said Antonio Cavarero, head of investments at Generali Insurance Asset Management.

"But in the short-term, real yields are still too low to provide an alternative, so the evolution of what happens next depends on COVID and the macro data."

The pan-European STOXX 600 index rose 0.9per cent and was set for a 1.2per cent weekly rise, its best in a month, supported by upbeat earnings. French car parts maker Valeo jumped 8per cent after it posted higher first-half sales and profit.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.7per cent, leaving it down 1.4per cent on the week.

Japan's Nikkei was closed for a holiday, but off 1.7per cent for the week and a whisker away from a seven-month trough.

Financial market volatility was expected to continue, given the resurgent Delta variant and economic uncertainty.

There were mixed signals from business activity surveys tracked closely by investors. In Britain, the IHS Markit/CIPS flash composite purchasing managers index (PMI) dropped to 57.7 in July from 62.2 in June, its lowest since March.

But the composite euro zone PMI climbed to 60.6 in July from 59.5, its highest reading since July 2000. It was ahead of the 50-mark separating growth from contraction.

"Uncertainty has increased again with the pandemic," said Pascal Peronne, a fixed income portfolio manager at Eric Sturdza Investments in Geneva. "I don't think there will be a closing of economies to the extent we saw last year, but we don't know."

Russia's central bank meanwhile increased its key rate to 6.5per cent, delivering its sharpest rate hike since late 2014 amid stubbornly high inflation.

The rouble was largely unchanged after the move, hovering at 73.65 against the dollar.

RISK ON

Risk-on sentiment in equities eased demand for safe-haven debt.

U.S. 10-year Treasury yields rose 2.5 basis points to 1.29per cent, above five-month lows of 1.128per cent hit early in the week.

German 10-year bond yields rose too, meaning prices fell. At -0.40per cent, yields held above recent five-month lows.

But sentiment towards European bonds was supported by a dovish European Central Bank, which pledged on Thursday not to raise rates until inflation was sustainably at its new 2per cent target.

"If we see substantive policy action in the months ahead to back up the new inflation goal, I would not be surprised to see bond yields push lower and market-based inflation expectations rise," said Katharine Neiss, chief European economist for PGIM Fixed Income.

The dollar was set to end the week with small gains after a turbulent few days, with the dollar index up 0.2per cent for the week, rising on Friday to stand at 92.917.

The euro was a touch weaker at US$1.1766, while sterling shed around a quarter of a percent to US$1.37.

Elsewhere, Brent crude oil was down 0.3per cent at US$73.56 a barrel, after jumping 2.2per cent on Thursday, while U.S. crude fell 0.25per cent to US$71.73 per barrel.

(Reporting by Dhara Ranasinghe; Additional reporting by Wayne Cole in SYDNEY; Editing by Ana Nicolaci da Costa and Pravin Char)

Source: Reuters

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