London: World stocks clawed back more losses on Friday after spending much of the week in the red, helped by signs of progress in US tax reform and strong corporate results, though many hurdles remain to secure passage of a tax cut deal.

The US House of Representatives passed a tax overhaul expected to boost share prices if it becomes law. The legislative battle now shifts to the Senate.

Despite their bounceback, however, global stocks were still on track for a second straight week of losses, their longest losing streak since August.

The MSCI world equity index, which tracks shares in 47 countries was up 0.1 per cent on the day, but was heading for a 0.1 per cent fall on the week.

European shares were sluggish in early deals after the previous session’s strong recovery, with the STOXX 600 index falling back 0.1 per cent as disappointing company results and downgrades weighed.

As earnings season drew to a close with 90 per cent of US and European companies having reported, analysts said results were supportive but weaker than in the previous quarters.

“European equity markets are trading in the red this morning and while this is being attributed to downgrades and earnings, I think it’s simply part of a broader move away from risk and a decision to lock in some profits,” said OANDA markets analyst Craig Erlam.

But it has been a bruising week, with global high yield bond markets also on course for a second straight week of losses — for the first time in a year — and Wall Street volatility at its highest in three months. On Friday, however, high yield “junk” bond prices recovered and market volatility also eased.

The US Treasury yield curve remained on investors’ radar, reaching its flattest level in a decade, reflecting a belief that the Federal Reserve will continue to raise interest rates, pushing yields on the short end higher. At the same time, US

inflation, although trending higher, will likely remain subdued, limiting yields on longer-dated bonds.

The spread between US 2-year and 10-year yields narrowed 1.6 basis points. It was last at 64.34 basis points.

Risk asset recovery

In Europe, German yields steadied but remained on track for their biggest weekly drop since the European Central Bank’s meeting at the end of October, as the stock market wobble pushed cash towards safe-haven assets.

“The risk asset recovery and a more negative technical picture have put some pressure on bond markets,” Societe Generale strategists wrote, adding, however, that they don’t expect a wider sell-off.

A benign Eurozone backdrop did, however, help compress yields on other Eurozone debt, with French yield premia over Germany falling this week to the lowest in 2-1/2 year lows.

The euro also enjoyed gains, up 0.2 per cent against the dollar at $1.1793. Strong Eurozone GDP figures helped the common currency recover fully from its end-October drop when the ECB extended its asset purchase programme.

ECB President Mario Draghi said the central bank’s decision to extend the programme until September 2018 was key in pushing market expectations for the first rate hike further into the future.

Greenback falls

Meanwhile the US dollar was dented by a report that Special Counsel Robert Mueller’s team last month subpoenaed President Donald Trump’s campaign for documents containing specified Russian keywords from more than a dozen officials.

The greenback fell 0.2 per cent against a basket of six major currencies.

“The dollar’s temporary rally (since September) appears to have ended in early November, and the euro is now receiving broad-based support,” wrote UniCredit analysts in a note.

“Investors have probably increased their focus on good Eurozone fundamentals, rewarding the common currency across the board. We agree and anticipate further widespread euro gains.” Bitcoin was trading down 3.8 per cent, at $7,560.

Emerging stocks gained 0.8 per cent, helped by the broadly risk-on mood.

Oil prices rose but remained en route for their first week of losses in six, as concerns grew over Russia’s support for an extension of the crude output cuts that have bolstered prices in recent months.

US light crude rose 1.6 per cent to $56.03 a barrel, but still within its trading range in the past couple of days.

It was down 2.1 per cent on the week.

Brent futures hit a two-week low of $62.08 a barrel but last stood 1.2 per cent higher at $62.10.