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A series of strong economic data dispelled the gloom of US recession, and global stock markets recorded their biggest weekly gain since November last year.

In the United States, the S&P 500 broke a four-week losing streak and rose 3.9% this week.This was the strongest performance since last November.Friday's trend was relatively stable, but the U.S. stock market still maintained the upward trend of the previous few days.Currently, the S&P 500 is just 2% below its all-time high reached in July.

Japanese stocks, which were bloodbathed in early August, surged 3% on Friday, up 7.9% this week, and the Euro Stoxx 600 index rose 2.4%. The MSCI Global Developed Markets Stock Index also recorded its best weekly performance since early November last year.

"A lot of the fear and anxiety has been dispelled,"Charles Schwab"The data shows that the U.S. economy is slowing, but (recession) is only an expectation after two years of rate hikes. (The economy has not really entered a recession). People just get nervous when the economy slows significantly," said Joe Mazzola, chief trading and derivatives strategist at Bloomberg.

Economic data is stronger than expected, recession fears subside

The market's recovery this week was mainly driven by economic data:

Announced on WednesdayThe year-on-year growth rate fell below 3% for the first time since 2021, falling within the official target range set by the Federal Reserve.

On Thursday,Investor confidence was boosted by lower-than-expected initial jobless claims in the week ended August 10, which unexpectedly hit a 1-and-a-half-year high.

Consumer confidence also came in stronger than expected on Friday, just above an eight-month low hit in July. The VIX, the volatility index known as Wall Street's "fear gauge," fell below 15, compared with a four-year high of 65 in early August during a global sell-off.

"Right now, the market is really in knee-jerk reaction mode to the data that's coming out," said Liz Ann Sonders, chief investment strategist at Charles Schwab in New York.

BlackRockLi Wei, global chief investment strategist, pointed out: "The trend in the past few weeks shows that the market trend can fluctuate based on a single data.We may see more volatility in the future.”

Fed funds futures on Friday showed investors have fully priced in three rate cuts before the end of the year and see a high probability of four cuts this year.

Less than two weeks ago, the U.S. non-farm unemployment rate triggered recession fears, set off a turbulent wave in global stock markets and led investors to bet on a sharp 50 basis point interest rate cut by the Federal Reserve in September.

The 2-year U.S. Treasury yield, which is closely related to interest rate expectations, closed at 4.05% on Friday, up 0.39 percentage points from its low on August 5.

"This has been a largely 'one-way' week with the pessimistic outlook being hit hard," said Florian Ielpo of Lombard Odier Investment Managers. "Nevertheless, economic data remain conflicting. Significant uncertainties remain and caution is needed to avoid excessive optimism."

Will the rally continue next week? Pay attention to the annual meeting of global central banks

Next week, investors are closely watching the annual global central bank meeting. Wall Street generally believes that Powell's speech at the meeting will pave the way for a rate cut in September.

“We expect Fed Chairman Jay Powell to more explicitly signal a September rate cut and provide broader context for the Fed’s expectations regarding the pace of future rate cuts,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

"We expect Powell to signal that the Fed could cut rates in September given recent developments, but will not fully commit to the size of the cut. We expect a 25 basis point cut," TD Securities strategists said.