Global stocks bounce back after volatile week as Fed chair Powell’s comments prop up risk appetite

• Global stocks rose on Friday after a rollercoaster week after a more dovish outlook from the Fed.
• US stock futures rose, suggesting a rebound later in the day when the market opens.

Global stocks climbed on Friday after a volatile week of plunges, with US stock futures and Asian and European stocks gaining after dropping on Thursday.

The MSCI All-World index of global shares rose 0.39% on Friday, but was still set for its sixth straight weekly loss. Dow Jones futures rose 0.73%, S&P 500 futures gained 1.02%, and Nasdaq 100 futures jumped 1.55% after Federal Reserve Chair Jerome Powell downplayed the chances of the central bank raising interest rates by more than half a point at a time as it tames inflation.

"Those earlier comments from Chair Powell after the US close have supported risk appetite, particularly since he echoed his previous comments about the Fed being on course for further 50-basis point hikes at the next couple of meetings, rather than moving towards 75 basis points in the aftermath of the stronger-than-expected CPI reading," said Deutsche Bank research strategist Jim Reid. US consumer price index data for April showed inflation rising by more than expected and at 40-year highs.

Powell's comments propped up risk appetite globally, with Asian and European stocks also gaining after Thursday's tumble.

The FTSE 100 gained 1.46% with the STOXX 600 rising 1.23% and Germany's DAX up 1.17%. In Asia, Japan's Nikkei 225 climbed 2.64% with China's Shanghai index rising 0.96% and Hong Kong's Hang SengIndex gaining 2.68%

San Francisco Fed President Mary Daly said she also favored half-point hikes at the coming meetings, rather than a larger three-quarter point increase.

Stocks worldwide had a rollercoaster week of volatility as persistently high inflation spooked markets, dragging stocks down, while a meltdown in a controversial stablecoin roiled cryptocurrencies and sent bitcoin spiraling to its lowest since late 2020.

Central banks struggled with taming record inflation as aggressive monetary tightening risked stagflation, a toxic combination of high inflation and low economic growth.

"We've seen more wild swings in equity markets over the last 24 hours, largely driven by a concern over slowing growth, and sticky inflation, raising fears of looming stagflation and possible recession," Michael Hewson, chief market analyst at CMC Markets said.

In a Thursday interview with Marketplace where he spoke about the rate hikes, Powell said, "Inflation is just way too high here in the United States. And by the way, the same all over the world, really."

"Whether we can execute a soft landing or not, it may actually depend on factors that we don't control," Powell said on Friday. A soft landing would be taming inflation without throwing the economy into a recession.

Major figures are worried about the Fed succeeding in its soft landing. JPMorgan CEO Jamie Dimon said last he saw a one-in-three chance of the Fed accomplishing a soft landing, and a similar probability the country plunges into a severe recession.

Cryptocurrencies also bounced back from this week's crash with bitcoin gaining 6.33% to $30,357 and ether rising 5.31% to $2088 after Friday's drop. The market has been unnerved by the same factors that have affected stocks. But the collapse of the TerraUSD stablecoin and its sister cryptocurrency luna has had a ripple-effect across the entire crypto sector, sending investors fleeing.

In spite of Friday's bounce, bitcoin was still headed for its longest streak of weekly losses, down almost 11% for the week.