European stocks rebounded as China’s interest rate move helped spur confidence

LONDON (Reuters) – Stocks rebounded on Friday after China cut a key lending benchmark to support its economy, although a gauge of global stocks remained set for its longest-ever streak of weekly losses amid investor concerns about slowing growth and rising inflation.

China cut the five-year loan base interest rate (LPR) – which influences mortgage pricing – by 15 basis points on Friday morning, a sharper drop than expected, as authorities seek to mitigate the impact of an economic slowdown. I left the LPR for one year unchanged. Read more

It’s 0833 GMT, Stokes 600 pan-European (.stoxx) It was up 1.2% and poised for its first daily gain in three.

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MSCI World Stock Index (.MIWD00000PUS), which measures stocks in 50 countries, is up 0.5% but this week it was still down 1% and heading for its seventh consecutive weekly decline, its longest losing streak since it started in 2001. It will also be the longest including testing back. The data extends back to January 1988.

“Obviously investors are looking to do some bargaining, because some stocks look very cheap right now,” said Nathan Sweeney, vice president of information at Marlboro Investment Management.

He added that the Chinese LPR cut “shows that not all central banks are trying to create an environment where the market sells at lower prices.”

Gains in Europe and Asia came after the rally faded late Thursday on Wall Street, leaving the Dow Jones Industrial Average. (.DJI) The S&P 500 Index is down 0.75%. (.SPX) The Nasdaq Composite Index is down 0.58% (nineteenth) by 0.26%.

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Eurozone bond yields rose after two days of sharp declines as risk sentiment improved after China cut interest rates.

The German 10-year government bond yield rose 3 basis points at 0.969%, well below last week’s eight-year high of 1.189%.

Money markets are now pricing in 38 basis points of tightening from the European Central Bank by its July meeting. This indicates that the 25 basis point rise is fully priced in, and the markets are pinning a ~52% probability of an additional 25 basis point move.

The yield on the US 10-year bond was 2.860%, up half a basis point from Thursday’s close, and down from a high of 2.873% earlier on Friday. The two-year yield rose 2 points to 2.631% compared to the US close at 2.611%.

In the currency markets, movements were relatively muted with little change in the dollar but still heading for its worst week since early February, after a 10% rally for 14 weeks.

The dollar index, which measures the currency against six major rivals, settled at 102.91.

Gold prices have been firmer and heading for their first weekly gain since mid-April as the dollar weakened. Spot gold was up 0.1% at $1,844 an ounce, after rising 1.4% to a one-week high on Thursday.

Oil prices fell as investors worried that weak global economic growth and tightening central bank monetary policy could limit the recovery in fuel demand. Read more

Brent crude futures for July fell 31 cents, or 0.28 percent, to $111.73 a barrel, while US West Texas Intermediate crude for June fell 56 cents, or 0.5 percent, to $111.65 on the last day of the month.

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Bitcoin price was flat at $30295. Smaller rival Ether rose 0.6 percent to $2,030.

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Additional reporting by Samuel Indyk in London and Andrew Galbraith in Shanghai; Editing by John Stonestreet

Our criteria: Thomson Reuters Trust Principles.

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