Global stocks are on track for a weekly gain as expectations for rapid-fire US rate cuts promise to lower borrowing costs globally, a relief to stressed bond markets and a drag on the dollar.
European shares dipped 0.2 per cent in opening trade on Friday, while Nasdaq and S&P 500 futures were off 0.1-0.2 per cent, having hit new peaks overnight.
The MSCI All Country World Index nonetheless remained on track for a 1.7 per cent weekly gain.
Gold, meanwhile, was on track for a fourth weekly gain in a row and traded near record levels, in a sign that investor concerns about global economic uncertainties persist.
Stock markets across Asia had earlier made strong gains, while Chinese stocks hit a three-and-a-half-year high, spurred by extravagant expectations for AI-related earnings growth.
The US consumer price report had been the last major hurdle to the Federal Reserve cutting interest rates next week, and while it showed an increase in prices, markets remained focused on weak job numbers in the previous week.
“Even if we have some weaker numbers on the job market, the markets are really focusing on the Fed impact that will give a new boost to growth in the future,” said Amelie Derambure, senior multi-asset portfolio manager at Amundi.
Veronica Clark, an economist at Citi, said the bank continued to expect 125 basis points of Fed rate cuts over the next five meetings.
Futures markets show a 93 per cent chance of a quarter-point cut to 4.00 per cent-4.25 per cent next week, and a seven per cent chance of a half-point cut.
The yield on benchmark 10-year Treasury notes rose 3 bps to 4.043 per cent, having fallen below four per cent for the first time since April on Thursday.
In currency markets, the dollar index – which measures the greenback against six peers – edged 0.2 per cent higher to 97.757.
The dollar gained 0.5 per cent versus the yen to 147.89, after Japanese and US finance ministers on Friday released a statement reaffirming that neither country would target currency levels in their policies.
The euro shed 0.1 per cent to $US1.171725, having received a modest fillip on Thursday when the European Central Bank kept rates unchanged and signalled that it was in a “good place” on policy.
“This suggests the governing council is not inclined to ease in the absence of a large growth shock,” said Greg Fuzesi, an economist at JPMorgan.
“We have thus moved back our call for a final rate cut from October to December.”
After the meeting, ECB sources told Reuters the December meeting would be the most realistic time frame to debate whether another cut was needed to buffer the economy.
Markets imply only a one-in-six chance of a December easing.
Britain’s economy recorded zero monthly growth in July, in line with forecasts but showing a sharp drop in factory output, weighing on sterling which was down 0.3 per cent at $US1.3536.
In commodity markets, gold firmed 0.3 per cent to $US3,644 an ounce, just off the record top of $US3,673.95 hit early in the week.
Oil prices were subdued after the International Energy Agency predicted an even larger record oil surplus in 2026 as OPEC continues to pump more product.
Brent was broadly flat at $US66.38 a barrel, while US crude eased 0.1 per cent to $62.31 per barrel.