Global stocks headed for their first weekly losses of the year as markets shifted focus from China's reopening to recession risks fueled by central bank rate hikes.
The MSCI World Price Index was 0.3% higher by midday in London, boosted by gains in Asia, after Chinese authorities said on Thursday that the number of Covid-19 patients requiring critical care in hospitals had peaked.
The countrywide equity index is also on track to post a loss of around 1.5% for the week. Wall Street's benchmark S&P 500 was on track for its worst weekly decline in more than a month, down around 2.5% at Thursday's close. S&P futures traded flat ahead of the market open.
Some analysts say equities have shown too much confidence in an improving economy, as both the U.S. Federal Reserve and the European Central Bank remains committed to tightening monetary policy to combat inflation.
Europe's STOXX 600 stock index, which rose 0.5% on Friday, has recovered almost half of 2022's 12.9% loss in the first three weeks of January. The rebound has been fueled by the reopening of trade by China and falling natural gas prices.
"European markets remain unprepared for the wave of recession that comes from tightening credit conditions," said Andreas Bruckner, European equity strategist at Bank of America.
ECB President Christine Lagarde told the World Economic Forum's Davos gathering on Thursday that the bank will continue to raise interest rates.
The Fed also appeared poised to maintain its interest rate hike campaign, even after reports on Wednesday showed retail sales, producer prices and output at U.S. factories. fell more than expected in December.
On Thursday, US weekly jobless claims were also lower than expected, indicating a strong labor market, which sent the S&P 500 0.8% lower.
Boston Fed President Susan Collins said the central bank may need to raise rates to 5% and then hold them, while Fed Vice Chairman Lael Brainard said that despite recent moderate inflation, it remains high and interest rate hikes should continue.
The 10-year US Treasury yield hit its lowest level since mid-September earlier this week, as traders bet weak economic data would force the Fed to slow its pace of interest rate hikes.
The 10-year key yield added around 4 basis points to 3.435% on Friday but remained well below the peak of around 4.3% reached in October. Bond yields fall when prices rise.
