Global equity markets edged lower as investors adopted a cautious stance following a record-setting rally driven by expectations of Federal Reserve interest-rate cuts. S&P 500 futures fell 0.2% after major US benchmarks hit all-time highs on Thursday, while Europe’s Stoxx 600 also eased. Asia bucked the trend, with MSCI’s regional index closing near a record high after tracking US sessions. US Treasury yields rose slightly, with the 10-year yield increasing two basis points to 4.04%, while the dollar rebounded and gold climbed above $3,640 an ounce.
The recent rally was fueled by economic data indicating a strained labor market and relatively contained inflation, reinforcing expectations of upcoming Fed cuts. Swaps pricing suggested traders anticipate two to three quarter-point reductions by year-end, with some speculating on a potential half-point cut next week. However, experts cautioned that markets may be overestimating the scale of rate reductions, warning that investors could be disappointed if expectations are not met.
European markets saw mixed movements, with the FTSE 100 outperforming amid a sluggish UK economic start to Q3, and French bonds lagging ahead of a Fitch Ratings update. Political uncertainties, including the failed confidence vote by former French Prime Minister Francois Bayrou, contributed to market volatility, although the spread on French 10-year government bonds versus German bunds remained steady. Analysts noted that markets were already pricing in potential credit downgrades ahead of any formal action by rating agencies.
Corporate developments influenced market sentiment. Giorgio Armani’s estate plans to sell a stake in his fashion house, Banco Sabadell rejected BBVA’s $18 billion takeover offer, and Ocado Group shares declined after Kroger announced a review of some automated facilities. Additionally, OpenAI and Nvidia executives are expected to support UK data center investments, while Paramount Skydance prepares a bid for Warner Bros. Discovery. Alibaba’s shares rose on initiatives to strengthen its AI sector, and Adobe projected strong quarterly revenue thanks to AI investments.
In terms of market movements, Stoxx Europe 600 fell 0.2%, S&P 500 futures dipped 0.2%, and Nasdaq 100 futures were largely unchanged. MSCI Asia Pacific and Emerging Markets indices rose 0.8% and 1.1%, respectively. Currencies saw modest fluctuations, with the Bloomberg Dollar Spot Index up 0.2%, the euro down 0.1% to $1.1717, and the yen weakening 0.5% to 147.89 per dollar. Bitcoin rose 0.6% to $115,062.25, and Ether climbed 2.2% to $4,516.04. In fixed income, US, German, and UK 10-year yields edged higher, while Brent crude slipped 0.1% to $66.30 per barrel and gold advanced 0.2% to $3,641.67 an ounce.
Overall, investors balanced optimism from recent economic data and corporate developments with caution over Fed policy expectations, seasonal trends, and geopolitical uncertainties, resulting in a mixed trading session across global markets.
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