European equities were marginally higher on Friday as government bond yields retreated from recent highs, but higher-than-anticipated inflation continued to weigh on markets.
After a week of market upheaval in which recession concerns drained equities and currency markets were shaken by the dollar’s strength, Asian stocks tumbled on Friday and were on course for their largest monthly loss since the epidemic began in 2020.
The fact that Japan’s factories increased output in August and China’s manufacturing returned to growth did not reassure investors.
But European stocks recovered somewhat, although they remained on course for a third consecutive quarter of losses as markets fretted about the impact of central bank interest rate hikes on global economic development.
Inflation in the Euro zone reached a new high of 10% in September, exceeding estimates of a 9.7% increase, according to flash inflation statistics.
David Madden, a market analyst at Equiti Capital, stated that a decline in government bond yields allowed equities to inch higher, but this was unlikely to be the beginning of a sustained rebound.
“The big picture has not changed: yields are on an upward trajectory, inflation remains extremely high, and interest rates are expected to continue their ascent,” he stated.
The MSCI world equity index, which measures shares in 47 nations, was 0.2% higher on the day at 09:09 GMT.
Europe’s STOXX 600 was up 1.1%, but weekly, monthly, and quarterly losses were expected.
European government bond yields declined, with Germany’s 10-year yield falling 10 basis points to 2.115% from Wednesday’s 11-year high of 2.352%.
The dollar index remained unchanged on the day at 111.76 after reaching a 20-year high on Wednesday. This year, the dollar index has increased by more than 16%.
The British pound, which had been driven to all-time lows by a combination of dollar strength and the government’s plans for tax cuts supported by borrowing, rose 0.6% on the day to $1.119 as the Bank Of England took steps to calm markets.
It remained on course to have its worst quarter against the dollar since 2008.
Due to the rising cost of energy, German inflation reached its highest level in more than 25 years, as reported on Thursday.
European Central Bank officials have expressed increased support for a substantial rate hike.
Strong U.S. employment data released on Thursday provoked additional sell-offs on Wall Street, as the report was viewed as contributing to the case for additional Federal Reserve rate hikes. Fed officials made hawkish remarks overnight, underlining their inflationary concerns.
Oil prices were projected to experience their first weekly increase in five weeks.