European stocks rebound as 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 for global equities remains set for its longest ever streak of weekly losses in the 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

As of 08:33 GMT, the pan-European STOXX 600 (.STOXX) was up 1.2% and poised for its first daily gain in three.

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

“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.

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

The gains in Europe and Asia came after a late Thursday rally on Wall Street ended, leaving the Dow Jones Industrial Average (.DJI) down 0.75%, the S&P 500 (.SPX) down 0.58% and the Nasdaq Composite (.IXIC) 0.26%.

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

Germany’s 10-year government bond yield rose 3 basis points (bps) to 0.969%, well below the eight-year high of 1.189% hit last week.

Money markets are now anticipating 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.

The US 10-year yield was at 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 climbed 2 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, was trading at 102.91.

Gold prices were firmer and were set for their first weekly gain since mid-April as the dollar retreated. Spot gold rose 0.1% to $1,844 an ounce, after rising 1.4% to its highest level in a week on Thursday.

Oil prices fell as investors worried that weaker global economic growth and tighter central bank monetary policy could dampen a recovery in fuel demand. Read more

Brent crude futures for July fell 31 cents, or 0.28%, to $111.73 a barrel, while U.S. West Texas Intermediate (WTI) crude for June fell 56 cents, or 0. .5%, to $111.65 on the last day of the month.

Bitcoin was stable at $30,295. Smaller rival Ether rose 0.6% to $2,030.

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

Our standards: The Thomson Reuters Trust Principles.

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