Key facts
- Global stocks are trading near record highs, poised for a third consecutive weekly gain.
- Lower-than-expected U.S. inflation data has diminished expectations for an imminent Federal Reserve interest rate hike.
- Oil prices have risen due to stalled peace talks aimed at resolving the conflict in Iran.
- Gold prices have reached two-month highs, and bond yields have seen modest increases.
- The Japanese yen strengthened against the dollar following reports that the Bank of Japan may consider raising interest rates in September.
Global stocks were trading near record highs on Friday, poised for a third consecutive weekly gain, as cooler-than-expected U.S. inflation data eased concerns about an imminent interest rate hike by the Federal Reserve next month. The MSCI All-World index was trading just below its record peak, while the European STOXX 600 saw minor losses, with declines in the tech sector offset by gains in capital-intensive industries like defense and automotive.
Despite the positive sentiment in equities, oil prices saw an increase due to stalled peace talks aimed at resolving the conflict in Iran. Brent crude futures remained stable around $87 a barrel, heading for a significant weekly gain, while European and U.S. natural gas futures were also set for substantial weekly increases. Market-based measures of inflation expectations have continued to trend lower, and gold prices have reached two-month highs.
Investor sentiment appears largely unconcerned by geopolitical uncertainties, as reflected by a modest rise in short-dated bond yields and a continued decline in the VIX volatility index, which was on track for its longest weekly losing streak since May 2025. Analysts note a puzzling disconnect between geopolitical risks and asset price volatility, suggesting this equilibrium may not be permanent.
In currency markets, the Japanese yen strengthened against the dollar, reaching 159.13 yen per dollar. This move followed a report indicating that the Bank of Japan might consider raising interest rates as early as September, a decision that could help support the currency, which has been weakened by the central bank's cautious monetary policy.