European bourses managed to gain some ground on Friday, with the regional STOXX 600 and the DAX 30 index advancing around 1% each, as hopes of an economic comeback in major trading partner China were lifted by additional central bank stimulus. However, both benchmarks posted a weekly decline as investors remained concerned over the global growth outlook and the recession risk arising from surging inflation and rising borrowing costs. On the data front, producer inflation in Germany broke a fresh record high for the 5th month, and consumer confidence in the UK fell to its lowest level in at least 48 years, although retail sales unexpectedly jumped.

The consumer confidence indicator in the Euro Area edged up by 0.9 points from the previous month to -21.1 in May of 2022, beating market expectations of -21.5 as sentiment continues to recover from March’s 22-month low, a preliminary estimate showed. Still, morale remained far below its long-term average. In the European Union as a whole, consumer sentiment decreased by 0.4 points to -22.2.

Retail sales in the UK unexpectedly rose 1.4% mom in April of 2022, rebounding from falls in the previous two months and beating market forecasts of a 0.2% fall. Increases were seen in sales at food store (2.8%), namely alcohol and tobacco in supermarkets; non-store retailers (3.7%), namely clothing; and automotive fuel (1.4%). On the other hand, supermarket food sales were broadly unchanged and sales at non-food stores fell by 0.6% in April, mainly due to household goods stores (-0.5%) such as furniture stores. Excluding fuel, retail sales were also 1.4% higher. Considering the three months to April however, retail sales fell 0.3%, and the outlook for consumer spending remains subdued as high inflation is hurting the purchasing power.

The central bank of Paraguay unanimously decided to increase the monetary policy interest rate by 50 basis points, to 7.25% at its May meeting to tame the surging domestic inflation. The current rate is the highest since 2011 and the tenth consecutive hike since the monetary authority started the normalization process in August. The annual inflation rate in Paraguay accelerated to 11.8% in April, the highest since July of 2008, amid a surge in fuel and food prices. The monetary board expects inflation to remain high during the second quarter of 2022. As of the third quarter, a moderation in inflation is expected, ending 2022 and 2023 with a rate of 8.2% and 4.2% respectively.

WTI crude futures held above $112 per barrel on Friday as investors weighed an expected demand recovery in China and a looming EU ban on Russian oil against fears about a global economic slowdown. Oil demand is expected to rebound in China as authorities in Shanghai lifted some Covid curbs and gave residents the freedom to go out to shop for groceries for the first time in nearly two months. The EU also proposed this month a total ban on oil imports from Russia, with approval being delayed due to a holdout from some member states. In the US, data showed American driving mileage exceeded pre-pandemic levels in March, with gasoline and diesel prices hitting record highs. Meanwhile, investors feared that high inflation and rising interest rates could lead to a global recession. Recent sharp equity selloffs highlighted this risk, with analysts warning that oil could get caught up in the negative stock market feedback loop.

The S&P/TSX Composite Index ended little changed at 20,197.61 as gains in communications and utility almost offset the losses in health-care and materials. Fortis and Emera led utilities, adding 1.2% each. Communications advanced, led by TELUS and Quebecor. Among consumer staples, George Weston surged 1.5% and Empire Company gained 1.9%. On the contrary, materials sank, dragged down by Nutrien and Silvercrest. On the week, the S&P/TSX booked a meager 0.5% gain. The market is closed on Monday for Victoria Day.