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Global stocks posted their best week since November as volatility eased and investors shook off recent worries that the US was sliding into recession.
Stock markets around the world have rebounded sharply from their plunge earlier this month, helped by encouraging data from the US showing consumer resilience and falling inflation.
Wall Street S&P 500 Index Breaking a four-week losing streak, the company ended the week up 3.9%, adding 0.2% on Friday for its strongest showing since November.
“Most of the fear and anxiety has gone away,” said Joe Mazzola, chief trading and derivatives strategist at Charles Schwab. “The data shows the U.S. economy is slowing, but that’s to be expected two years into the rate-hike cycle. It’s just that right now [a slowdown] is actually beginning to manifest itself [that] people are nervous.”
The gains left the blue-chip index just 2 percent below its record high reached a month ago.
Japanese shares, which bore the brunt of the global sell-off in early August, rose 3% on Friday, putting their weekly gain at 7.9%, while the Stoxx Europe 600 index added 0.3% to reach 2.4%.
The MSCI World daily index of developed market shares also had its best week since early November.
Investors were looking ahead to the Federal Reserve's upcoming Jackson Hole symposium on Friday to get more information on the central bank's views on the direction of the interest rates.
“Our expectations concern [Fed chair Jay] “Powell needs to be more clear that we will see a rate cut in September and provide more context on how the Fed sees the pace of future rate cuts,” said Ian Lingen, head of U.S. rates strategy at BMO Capital Markets.
The market's recovery this week was supported by data that showed the U.S. economy was holding up better than feared. Inflation data on Wednesday showed that the annual growth rate of the consumer price index fell below 3 percent for the first time since March 2021, while on Thursday, High retail sales in the US and lower-than-expected new jobless claims boosted investor confidence.
Consumer confidence also came in stronger than expected on Friday, surpassing an eight-month low hit in July. The Vix volatility index, which Wall Street calls a “fear gauge,” dipped below 15, having hit a four-year high of 65 earlier in August amid a selloff.
“The moves over the past few weeks demonstrate how market sentiment can change based on individual data points, and we may see more volatility in the future,” said Wei Li, chief investment strategist at BlackRock.
Fed funds futures on Friday implied that investors had fully priced in three quarter-point rate cuts by year-end and saw a strong chance of another. Less than two weeks ago, recession fears had investors betting on a sharp half-point cut as early as next month.
The yield on two-year U.S. Treasuries, which is closely linked to interest rate expectations, ended Friday at 4.05%, up 0.39 percentage points from its recent low on Aug. 5. Yields move inversely with prices.