European stocks rebound, Chinese rate move bolsters sentiment

LONDON, May 20 (Reuters) – Stocks rebounded on Friday after China slashed a key benchmark to support its economy, although a gauge of global equities remains set for its longest streak of weekly losses on record amid investor concerns about slowing growth and high inflation.

China slashed its five-year prime lending rate (LPR) – which influences mortgage pricing – by 15 basis points on Friday morning, a steeper-than-expected cut, as authorities seek to cushion the impact of an economic downturn. He left the one-year LPR unchanged. Read more

At 10:53 GMT, the pan-European STOXX 600 (.STOXX) rose 1.6% and set for its first daily gain in three.

The MSCI Global Equity Index (.MIWD00000PUS)which tracks stocks in 50 countries, rose 0.5% but was still down 1% for the week and was on track for its seventh straight weekly decline, its longest losing streak since its inception in 2001. It would be also the longest, including back-tested data extending to January 1988.

U.S. equity futures indicated Wall Street would follow suit, with S&P 500 electronic futures up 1.1%, Dow futures up 0.9% and Nasdaq futures 100, up 1.4%.

“Investors are obviously looking to do a bit of bargain hunting because some stocks are looking pretty cheap right now,” said Nathan Sweeney, deputy IT director of multi-asset at investment manager Marlborough.

The reduction in the LPR in China “shows you that not all central banks are trying to create an environment where the market is selling out,” he added.

Eurozone bond yields rose after two days of sharp declines as risk sentiment improved following a rate cut in China.

Germany’s 10-year government bond yield rose 5 basis points (bps) to 0.989%, still below the eight-year high of 1.189% hit last week.

Money markets are now pricing in a 38 basis point tightening from the European Central Bank by its July meeting. This suggests that a 25 basis point rise is fully priced in and markets are attaching about a 52% probability to an additional 25 basis point move.

“A July liftoff seems almost a done deal, as does a September move to zero deposit rates,” analysts at Bank of America Global Research said in a research note.

“Our belief in four total interest rate hikes this year is growing, and there’s a good chance the noise is heading more towards 50 basis point hikes than the 25 basis points we continue to expect. .”

The US 10-year yield was at 2.864%, up one basis point from Thursday’s close, and down from a high of 2.873% earlier on Friday. The two-year yield climbed two basis points to 2.631% from a US close of 2.611%.

In currency markets, moves were relatively subdued, with the dollar little changed but still heading for its worst week since early February, following a 14-week rise of 10%.

The dollar index, which measures the currency against six major rivals, fell 0.1% to 102.84.

Gold prices were firmer and were set for their first weekly gain since mid-April as the dollar retreated. Spot gold rose 0.2% to $1,846 an ounce, after rising 1.4% to its highest level in a week on Thursday.

Oil prices were mixed as investors juggled a weakening outlook for global economic growth and tighter central bank monetary policy amid the planned European ban on Russian oil. Read more

Brent crude futures for July rose 27 cents, or 0.24%, to $112.30 a barrel, while U.S. West Texas Intermediate (WTI) crude for June fell 19 cents, or 0. .17%, to $112.02 on the last day of the first month.

The most actively traded WTI contract for July rose 6 cents to $109.95 a barrel.

Bitcoin was stable at $30,301. Smaller rival Ether rose 1% to $2,037.

Reporting by Samuel Indyk in London and Andrew Galbraith in Shanghai; edited by John Stonestreet and Hugh Lawson

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