The technology sector spurred a climb in stocks Friday and bonds held a rally as investors evaluated economic threats and scaled back expectations for inflation and interest-rate hikes.

The Stoxx Europe 600 rose 0.7%, with technology and utilities outperforming. The benchmark is set for a small bounce this week. Nasdaq 100 futures added 1% while contracts on the S&P 500 gained 0.8%, after the main US stock gauge closed near session highs Thursday, adding more than 3% in three days.

Despite the price gains, investors continued to yank cash from equity funds, which recorded their biggest outflows in nine weeks amid rising recession risk. About $16.8 billion exited global stock funds in the week through June 22, with US equities seeing their first outflow in seven weeks at $17.4 billion, Bank of America Corp. said, citing EPFR Global data. 

US data and Federal Reserve commentary this week lent more weight to economic concerns. Jobless claims hovered near a five-week high and manufacturing and services cooled. 

Fed Chair Jerome Powell in testimony to lawmakers reiterated that his commitment to bringing down price increases is “unconditional.” Fed Governor Michelle Bowman said she supports raising interest rates by 75 basis points again in July, followed by a few more half-point hikes.

Investors are grappling with the question of what comes next if an economic downturn takes hold. One scenario comprises cooling price pressures and hence scope for central banks to ease up on the pace of interest-rate hikes. 

The prospect of a peak in rates put the policy-sensitive US two-year yield is on course for one of its biggest weekly drops since March 2020. Traders are starting to price out any Fed action on rates beyond the December meeting, scaling back the additional tightening they expect and flirting with the possibility of cuts by in 2023. 

Sliding raw materials prices has contributed to a moderation in market-based measures of inflation expectations. There’s a heated debate on whether the trend will continue after a gauge of commodities retreated to its lowest level since February.

Oil held at around $104 a barrel Friday. Elsewhere, Bitcoin hovered near $21,000, extending a bout of relative stability. The dollar slipped and the yen strengthened.

How will the second half of this year play out for major asset classes? We are re-running MLIV’s 2022 asset survey from December to see how street views have evolved amid the turmoil and volatility in the past few months. Click here to participate anonymously.

What to watch this week:

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.7% as of 8:52 a.m. London time
• Futures on the S&P 500 rose 0.8%
• Futures on the Nasdaq 100 rose 1.1%
• Futures on the Dow Jones Industrial Average rose 0.6%
• The MSCI Asia Pacific Index rose 1.1%
• The MSCI Emerging Markets Index rose 1.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0524
• The Japanese yen rose 0.2% to 134.62 per dollar
• The offshore yuan rose 0.1% to 6.6925 per dollar
• The British pound was little changed at $1.2267

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.06%
• Germany’s 10-year yield declined six basis points to 1.37%
• Britain’s 10-year yield declined four basis points to 2.28%

Commodities

• Brent crude fell 0.3% to $109.71 a barrel
• Spot gold rose 0.3% to $1,829 an ounce

SOURCE :- bloomberg