Stocks drop worldwide as investors brace for crucial week
MSCI's global equity index retreated from an all-time high and was 0.2 per cent lower in early European trading, while Japan's Topix index ended the day 0.9 per cent lower after rising to a record on Thursday.
Europe's STOXX 600 share index also fell 0.5 per cent in early trade. Ahead of the August 1 deadline for US trade deals with Europe and China, stock markets have been buoyed by firm US economic data and framed the risk of tariffs hitting growth as a reason to expect Federal Reserve rate cuts.
"Higher (US) inflation will, in time, result in weaker demand and weaker investment," UBS Wealth Management economist Dean Turner said.
Van Luu, head of solutions strategy, fixed income and foreign exchange at Russell Investments, said he was waiting for a buying opportunity in US Treasuries for this reason.
"US data looks astonishingly resilient," he said, but this likely reflected a spending rush before tariffs pushed business input costs and retail sticker prices higher.
Risk events
The past week saw US trade agreements with Japan, Indonesia and the Philippines, while deal talks continued with South Korea.
Next week brings the next Fed interest rate meeting, the closely watched monthly payrolls report, and earnings from Amazon, Apple, Meta and Microsoft. Trump has kept up pressure on Fed Chair Jerome Powell to cut rates after a rare presidential visit to the central bank on Thursday, although he said he did not intend to fire Powell, as he has frequently suggested he would.
US 10-year Treasury yields were steady at 4.41 per cent, while two-year yields, which track monetary policy bets, were also flat at 3.92 per cent.
Robust earnings from Google parent Alphabet took Wall Street's Nasdaq to a record high on Thursday, but futures trading signalled the tech-heavy index would flatline at the start of cash trading in New York.
Contracts tracking the blue-chip S&P 500 index were also flat in early European dealings.
The Bank of Japan has its own policy announcement on Thursday, and Prime Minister Ishiba's Liberal Democratic Party holds a meeting on the same day. That's after the European Central Bank held rates steady on Thursday, pausing its easing campaign as it waited to assess the impact from US tariffs.
The euro was steady against the dollar on Friday at US$1.1745, although German government debt sold off, with the yield on benchmark 10-year Bunds up 5 basis points in early dealings to 2.74 per cent, the highest since March 28.
Japanese government bond yields were steady on Friday at about 1.60 per cent, a level last seen in October 2008, having ratcheted higher on concerns the political scale is tilting more towards fiscal stimulus. This came after big gains for opposition parties backing consumption tax cuts in Sunday's upper house election. Pressure is building on the more fiscally hawkish Ishiba to quit after his coalition lost its majority in the vote, having done the same in lower house elections last October.
Gold eased 0.3 per cent to around US$3,356 an ounce.
Brent crude futures gained 0.7 per cent to US$69.65 a barrel.
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