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Stocks cling to gains, hopes for Fed pause lift dollar

*Oil poised to end the week flat *Dollar poised for biggest weekly gains since Feb *Nikkei rises 0.9 pc to highest in 1-1/2 years *US stock index futures up ahead of Wall Street open *Banking fears linger after fall in PacWest deposits
Traders work on the floor of the New York Stock Exchange in New York City. - Reuters
Traders work on the floor of the New York Stock Exchange in New York City. - Reuters

LONDON: Global stock markets clung to modest gains on Friday, reassured by the prospect of a steady start on Wall Street, though worries over US government finances capped investor appetite for risk.

Oil prices shook off earlier losses as signs of a supply deficit countered worries over fuel demand in the United States and China.

The dollar edged higher, heading for its biggest weekly gain since February as investors bet that overnight data showing a slowing US economy would prompt the US Federal Reserve to pause on rate hikes.

The MSCI All Country stock index was flat and little changed for the week, but still up about 7 per cent for the year.

Nasdaq futures and S&P 500 futures were firmer, with Tesla Inc up 1.5 per cent in pre-market trading as the electric vehicle maker raised the US prices of some models and boss Elon Musk said he has found a new chief executive for Twitter.

In Europe, the STOXX index of 600 companies edged up 0.4 per cent, putting it slightly firmer for the week as Richemont shares hit a record high on news of strong demand in the Asia Pacific region.

Britain's economy grew in the first three months of the year - instead of recession that was being forecast in late 2022 - but recovery remains fragile.

Analysts said investors are searching for fresh reasons to push markets out of their ranges as a generally positive earnings season draws to a close and the next batch of major central bank rate-setting meetings are a few weeks away.

"We have had an aggressively sideways moving market and people are looking for something to give it direction," said Mark Tinker, chief investment officer at Toscafund asset management in Hong Kong.

A meeting between US President Joe Biden and top lawmakers that had been scheduled for Friday has been postponed to early next week, with the IMF warning that a US default would have "serious repercussions" for the US economy.

"We have a lot of things to trip over in the next six months and that is why people are not committing to buying," Tinker said, pointing to the US debt ceiling stalemate, ending the use of Libor interest rates in June, and how the war in Ukraine unfolds.

US data on Thursday added confidence that the Federal Reserve is almost certain to pause its rate hikes at its policy meeting in June, with futures markets continuing to price in cuts of about 78 basis points by the end of the year.

Next week, investors will be scrutinising a batch of US data for rate clues, with retail sales and industrial production figures.

"The former should get a lift from robust auto sales, while the latter will be held back by falling production," ING bank said.


China's economic recovery seems to be losing steam, with new bank loans tumbling in April, consumer prices rising at the slowest pace in more than two years and imports unexpectedly contracting, driving a plunge in commodity prices from copper and iron ore to oil.

China's blue-chips fell 1.3 per cent and looked poised to lose 1.7 per cent for the week, while Hong Kong stocks were down 0.5 per cent on the day.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.6 per cent and was headed for a weekly decline of 1.2 per cent.

Japanese shares outperformed, however, with the Nikkei climbing 0.9 per cent to its highest level since November 2021, as investors cheered announcements of increased shareholder returns during earnings season.

The US dollar benefited from safe-haven flows amid growth concerns and banking worries, holding on to slim gains against a basket of currencies.

The euro was trading at $1.089, down 0.2 per cent on the day, and sterling was slightly firmer at $1.2527.

Treasury yields firmed, with benchmark 10-year notes at 3.4177 per cent, while two-year yields were at 3.9140 per cent.

US crude futures edged up 0.4 per cent to $71.17 per barrel, while Brent crude gained 0.3 per cent to $75.24 per barrel.

Gold prices were 0.6 per cent lower at $2,004 per ounce. Bitcoin was down 2.3 per cent at $26,362. - Reuters

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