LONDON / SHANGHAI – World stocks rose from the previous day's 18-month lows and the dollar pulled back from 20-year highs on Friday, though investors remained nervous about high inflation and the impact of rising interest rates.
Markets are becoming anxious about the possibility of recession, with the S&P getting close to a bear market on Thursday, at nearly 20 percent off its January all-time high.
In an interview late on Thursday, US Federal Reserve Chair Jerome Powell said the battle to control inflation would "include some pain". Powell repeated his expectation of half-percentage-point interest rate rises at each of the Fed's next two policy meetings, while pledging that "we're prepared to do more".
The conflict in Ukraine has aggravated supply chain disruptions and inflationary pressures already in place after more than two years of the COVID-19 pandemic, but stocks enjoyed a bounce on Friday.
"There's an awful lot of negative sentiment out there, we're looking at a 40 percent chance of recession," said Patrick Spencer, vice-chairman of equities at Baird Investment Bank.
"A lot of fund managers have cut their equity allocations and raised cash, though we think this is a correction rather than a bear market."
MSCI's world equity index rose 0.32 percent after hitting its lowest since November 2020 on Thursday, though it was heading for a 4 percent fall on the week, its sixth straight week of losses.
S&P futures bounced 1.13 percent after the S&P index dropped 0.13 percent overnight, with the index also eyeing a sixth straight week of declines.
European stocks rallied 0.96 percent and Britain's FTSE 100 gained 1.17 percent.
The US dollar eased 0.22 percent to 104.54 against a basket of currencies, but remained close to 20-year highs due to safe haven demand.
The dollar rose 0.36 percent to 128.76 yen, while the euro gained 0.3 percent to $1.0408, recovering from Thursday's five-year lows.
Cryptocurrency bitcoin also turned higher, cracking through $30,000 after the collapse of TerraUSD, a so-called stablecoin, drove it to a 16-month low of around $25,400 on Thursday.
"Some traders may see the sharp fall this month as an opportunity to buy the dip, but given the hugely volatile nature of the coins, the crypto house of cards could tumble further," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The moves higher in equities were mirrored in US Treasuries, with the benchmark US 10-year yield edging up to 2.9221 percent from a close of 2.817 percent on Thursday.
The policy-sensitive 2-year yield was at 2.6006 percent, up from a close of 2.522 percent.
German 10-year government bond yields edged up to 0.9250 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan was up almost 2 percent from Thursday's 22-month closing low, trimming its losses for the week to less than 3 percent.
Australian shares gained 1.93 percent, while Japan's Nikkei stock index jumped 2.64 percent.
Oil prices were higher against the backdrop of a pending European Union ban on Russian oil, but were still set for their first weekly loss in three weeks, hit by concerns over inflation.
US crude rose 0.75 percent to $106.97 a barrel, and global benchmark Brent crude was up 1.05 percent at $108.58 per barrel.
Spot gold, which had been driven to a three-month low by the soaring dollar, was up 0.2 percent at $1,824.61 per ounce.