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Global stocks rally as markets defy gloomy economic outlook

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·3-min read
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The FTSE 100 jumped in afternoon trade on Friday, lifted by a global stocks rally. Photo: Richard Baker/In Pictures via Getty
The FTSE 100 jumped in afternoon trade on Friday, lifted by a global stocks rally. Photo: Richard Baker/In Pictures via Getty

Global stocks pushed higher on Friday as traders defied a wider economic gloom, having benefited from a strong session on Wall Street and a positive performance by Asian and European markets.

The FTSE 100 (^FTSE) shot up 2.6% in afternoon trade. France’s CAC (^FCHI) climbed 3.3% on the day and the DAX (^GDAXI) rose 1.6% in Frankfurt.

It comes as retail sales fell in May as squeezed households cut back on food spending amid the fastest price increases in over a decade.

According to the Office for National Statistics, the volume of goods sold in store and online fell by 0.5% between April and May, driven by a slump in food sales which dropped 1.6%.

Separate figures from GfK showed UK consumer confidence slid to its lowest level since records began almost 50 years ago, as the cost of living crisis hits households, and a summer of strike action looms.

"As we approach the halfway point for 2022, investors continue to cross their fingers that markets will have a better second-half than the first six months of the year," said Russ Mould, investment director at AJ Bell.

Read more: UK retail sales fall as price rises force people to cut food shopping

Across the pond, US indices were in a sea of green on Friday. Wall Street’s S&P 500 (^GSPC) advanced 85.91 points, or 2.3%, to 3881.64 at London's close. The tech-heavy Nasdaq (^IXIC) was 2.7% higher, while the Dow Jones (^DJI) gained 2%.

On Thursday, Federal Reserve chair Jerome Powell warned that rapidly rising rates threatened recession.

Powell told the House Financial Services Committee that a recession was possible and that a soft landing would be "very challenging". During Thursday’s testimony he told lawmakers that the central bank would be reluctant to slash rates until there is clear evidence prices are coming down.

Read more: What is stagflation and can it lead to a recession?

Asian stocks were in the green overnight, led by a tech stock rally that saw shares in Chinese tech stalwart Alibaba (BABA) jump 6.6%.

The Hang Seng (^HSI) edged 2.2% higher in Hong Kong, while the Nikkei (^N225) closed up 1.2% in Tokyo and the Shanghai Composite (000001.SS) gained 1%.

Economic concerns dragged commodity markets in Asia trading.

Copper (HG=F), a bellwether for economic output with its wide range of industrial and construction uses, dropped 3% in Shanghai and down more than 7% for the week, its sharpest weekly fall since March 2020.

Benchmark grain prices sank with Chicago wheat (ZW=F) off nearly 9% for the week and at its lowest since March at $9.42 a bushel.

Oil prices rose after dipping overnight. Brent crude (BZ=F) was up 2.7% to $112.99 a barrel, and US light crude (CL=F) rose 3.1% to $107.52 at the time of writing.

Read more: UK retail sales fall as price rises force people to cut food shopping

"A slide in commodity prices added to the pessimism with copper prices sliding to 15-month lows, while oil prices have also come under pressure due to rising demand concerns," said Michael Hewson, chief market analyst at CMC Markets.

"This weakness has translated into a sharp slide in bond yields with US, German and UK 10-year yields seeing steep falls in the past two days."

Watch: What is a recession and how do we spot one?

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