(Times of Update) — European and U.S. stock futures rose Friday, riding gains in Asian stocks as traders turned to risk assets amid growing optimism that the U.S. economy can avoid a recession. The yen is on track for its worst week since May.
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The Euro Stoxx 50 futures rose 0.3% and the S&P 500 futures rose 0.2%, extending Wall Street’s overnight gains. Asia’s benchmark stock index is on track for its best weekly performance in more than a year, led by Japanese stocks as a weaker yen boosted exporters’ profits. The currency fell 1.3% against the dollar on Thursday and was trading around the 149 level, easing fears of a massive unwinding of the carry trade.
U.S. data this week, from inflation to jobless claims to retail sales, reassured investors that the world’s largest economy is heading toward a best-case scenario in which inflation is contained without dragging down growth. Global stocks have largely erased losses from last week, when traders worried the Federal Reserve would not cut rates quickly enough to avert a recession.
“Asian stocks are enjoying an impressive rally today, driven by a renewed sense of ‘perfect balance’ following recent much-anticipated economic releases,” said Hebe Chen, analyst at IG Markets Ltd. “Japanese stocks, in particular, are continuing their strong rally with no signs of slowing down yet.”
Asian interest rates held steady after Thursday’s cut as signs of a resilient U.S. economy in recent data prompted traders to trim their bets on a massive rate cut in September. They now anticipate a cut of less than 30 basis points next month, with a total of 92 basis points of cuts expected over the rest of 2024.
As concerns about the U.S. economy eased, stocks continued to rebound from last week’s slump that rattled global markets. The S&P 500 extended its six-day rally to 6.6% on Thursday, marking the best such performance since November 2022. Walmart Inc., often seen as a bellwether for growth, surged on a strong outlook.
Meanwhile, Wall Street’s fear index, the VIX, has fallen to around 15 after hitting 65 last week. This rebound in U.S. stocks after last week’s selloff suggests that trend-following quant funds may soon return, which could provide further support for stocks.
In Japan, stocks are heading for their strongest weekly gain since April 2020, driven by a further weakening of the yen. This weakness could even prompt some hedge funds to return to the carry trade, which exploded two weeks ago.
“Exporters are benefiting from the weak yen and strong U.S. economic data,” said Hiroshi Namioka, chief strategist at T&D Asset Management Co. “Stocks that fell sharply last month are being bought back as the market calms down after the rout.”
Elsewhere in Asia, China’s central bank chief pledged new measures to support the country’s economic recovery, while warning it would not adopt “drastic” measures…
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