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GLOBAL MARKETS-Stocks recoup most of week's sell-off as nerves steady
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GLOBAL MARKETS-Stocks recoup most of week's sell-off as nerves steady
Aug 9, 2024 5:51 AM

(Updated at 1200 GMT)

By Huw Jones

LONDON, Aug 9 (Reuters) - Global shares extended gains

on Friday to erase nearly all of their losses from a big

sell-off earlier in the week, with investors betting on the U.S.

economy avoiding a hard landing as Fed policymakers signalled

rate cuts as soon as September.

Wall Street stock index futures were about

0.3% firmer, with no major U.S. data expected on Friday as

nerves calmed following a volatile week that saw a mass

unwinding of currency carry trades in response to the Bank of

Japan's surprise rate hike late last month.

Reassurance from Federal Reserve policymakers that they were

more confident that inflation is cooling enough to cut rates,

along with a bigger-than-expected fall in U.S. jobless claims

data on Thursday, underpinned the recovery in stocks.

Oil prices headed for weekly gains of around 3% as

fears of a widening Middle East conflict persisted, while the

dollar hovered close to a one-week high.

The MSCI All Country stock index, was up

0.3% at 784.4 points, recovering much of the ground lost during

the week.

The benchmark is 5.7% below its lifetime high of 832.35

reached on July 12, though still up 7.5% for the year.

In Europe, the STOXX index of 600 companies was up

0.6%, with the loss for the week all but erased.

In a sign of calmer nerves, the VIX index, also known

as Wall Street's 'fear gauge', tumbled nearly 2%, a far cry from

its record one-day spike on Monday.

Divergent central bank interest rate moves, a repricing of

recession probability in the United States, thinner liquidity in

August accentuating volatility, and Middle East tensions all

combined to put the brakes on a months-long winning streak in

stocks to record-highs, analysts said.

"We are still in the month of August, so we can still have

some volatility," said Marie de Leyssac, portfolio manager at

Edmond de Rothschild Asset Management.

Investors will continue to study employment data, keep an

eye on the Bank of Japan, and particularly on the annual meeting

of global central bankers hosted by the Kansas City Fed in

Jackson Hole later this month, she said.

"This year I think it is a really important meeting because

we will have more insight into what (Federal Reserve Chair)

Jerome Powell sees for the future, and maybe more insight on the

path to lower rates," de Leyssac said.

Before then, investors will scrutinise next week's U.S.

consumer prices and retail sales figures for fresh evidence on

chances of the economy escaping a hard landing.

NIKKEI RECOVERS

Japan's Nikkei stocks benchmark closed 0.6% higher,

erasing most of the losses since a 12.4% crash on Monday.

The Nikkei has managed to claw back most of its losses after

a brutal sell-off on Monday due to recession worries and the

unwinding of investments funded by a soft yen, finishing the

week with a comparatively tame 2.5% decline.

The yen also veered from negative to positive

through the session, last trading at 147.060 per dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan

climbed 1.65%, more than reversing the drop from

Thursday. For the week, it has reversed earlier losses to be

largely flat.

"The prospect of better-than-feared U.S. growth and a weaker

yen constrain the fundamental and technical risks that inspired

the extreme volatility experienced at the start of the week,"

said Kyle Rodda, a senior financial market analyst at

Capital.com.

Some Federal Reserve officials said they were increasingly

confident that inflation is cooling enough to allow

interest-rate cuts ahead, but not because of the recent market

rout.

The U.S. dollar gained as markets gave up bets on an

emergency rate cut from the Fed, and is set for a 0.4% gain on

yen this week, despite Monday's precipitous 1.5% plunge.

Bond yields have climbed this week with safe-havens in less

demand, but began easing as confidence returned to markets. U.S.

10-year yields were at 3.957%. Two-year yields

were trading at 4.0385%.

Brent crude futures were trading up 0.4% at $79.47 a

barrel, and up more than 3% for the week, while U.S. West Texas

Intermediate crude advanced 0.4% to $76.50, and also up

over 3% for the week.

Gold prices were a touch firmer at $2,427 an ounce, and

heading for a drop on the week.

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