MILAN/TOKYO, June 27 (Reuters) – Global stocks extended their rebound on Monday, building on Wall Street’s strong close on Friday, as off-peak oil prices helped improve sentiment and temper fears of prolonged inflation.

Strong morning gains in Europe and a rally in Asian markets after China further eased COVID-19 restrictions lifted MSCI’s benchmark index for global stocks (.MIWD00000PUS) for a third straight session , up 0.5% at 0851 GMT.

Investors hope that the fall in oil prices from the three-month highs reached earlier in June could ease price pressures and allow the US Federal Reserve to tighten policy less aggressively than initially expected, reducing the risk of a economic recession.

“We believe there is a higher chance of oil prices falling simply due to easing demand from the United States, Europe and China due to the slowing economy. This in turn should help lower inflation expectations at least for the very end of this year,” said Jerome Schupp, fund manager at Prime Partners in Geneva.

“The next Fed meeting in July will be quite important. We should see the Fed continue to raise rates, probably 75 basis points. But the new message from (Fed Chairman Jerome) Powell will be more crucial. will say that they are satisfied with the new level of tariffs,” added Schupp.

Despite the strong three-day rebound that saw the MSCI global benchmark further distance itself from the November 2020 lows reached earlier this month, the index remains down more than 20% from its record close. of January, a fall commonly described as a bear market.

Traders said oversold market conditions and month-end portfolio rebalancing also contributed to the rally, though they expect greater volatility heading into the second-quarter earnings season.

MSCI’s broadest index of Asia-Pacific stocks (.MIAP00000PUS) rose 1.6%. Beijing said Saturday it would allow schools to resume in-person classes and Shanghai’s party leader declared victory over COVID-19 after the city reported zero new local cases for the first time in two months. Read more

The pan-regional benchmark STOXX 600 (.STOXX) gained more than 1% as the easing of Chinese restrictions boosted oil stocks and miners. Meanwhile, US stock index futures extended their gains, with the S&P 500 e-minis gaining around 0.6%.

Oil was volatile as the market grappled with worries about an economic slowdown and worries about the loss of Russian supplies amid sanctions over the Ukraine conflict. Read more

Brent prices rose 0.2% to $113.36 a barrel and US West Texas Intermediate futures fell 0.1% to $107.52.

Yields on 10-year US Treasuries held just above 3% as traders pulled back bets on bulls next year, but still pondered aggressive tightening this year. They rose 2 basis points to 3.16%, after hitting an 11-year high earlier this month.

“The market remains focused on the trade-off between the policy response to high inflation and fears of a hard landing,” Westpac rate strategist Damien McColough wrote in a note.

“There will be ongoing discussions about whether long-term yields have peaked, but we don’t yet expect 10-year yields to fall materially or sustainably below 3%,” he said. -he adds.

The dollar continued to consolidate near mid-month lows against major peers as traders reassessed the outlook for aggressive rate hikes.

The dollar index – which measures the currency against six rivals – fell 0.2% to 103.82.

Gold rose 0.7% to $1,838.8 an ounce, buoyed by news from some Western nations planning to officially ban metal imports from Russia for its invasion of Ukraine .

Bitcoin was flat, trading at $21,170.88 after falling to $17,588.88 earlier this month.

Reporting by Danilo Masoni, Kevin Buckland and Sam Byford, editing by Mark Heinrich

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