European shares set to cap strong week on upbeat earnings
SYDNEY/GDANSK - European stocks looked set to cap a strong week with gains on Friday, as upbeat earnings helped sustain the rally sparked by a U.S.-China trade truce, while oil prices remain relatively low, further supporting stocks and bonds.
It has been a positive week for global share markets as investors cheered a tariff truce between the United States and China that greatly reduces the risk of a global recession.
Europe's STOXX 600 rose 0.57% on Friday, and was up 1.6% on the week, set for its fifth straight week of gains, helped by luxury group Richemont's 7% climb after it reported strong quarterly sales.
MSCI's main gauge of Asia-Pacific stocks ex-Japan rose more than 3% this week, and the S&P500 is up 4.5% so far, with futures pointing to further gains at Friday's open.
The U.S. data calendar is lighter for the rest of the day, though there will be the University of Michigan consumer sentiment survey and U.S. import prices data for April.
However, there was enough uncertainty to keep investors cautious heading into the weekend.
"The markets confront a weekend with less risk of carrying open positions than last, with no major trade talks or significant risks on the calendar," said Kyle Rodda, senior analyst at Capital.com.
"However, there is always a slight risk-off bias going into the weekend during a Trump presidency, with a nasty downside surprise at the Monday open only ever one social media post away."
Oil prices have been choppier this week, rising on the U.S. China deal, before falling sharply on Thursday on increased supply pressure from an OPEC+ output hike and the prospect of an Iranian nuclear deal.
Brent futures were down slightly on Friday after a 2% Thursday fall, and were set to end the week just 0.8% higher.
Oil prices - low by recent standards - are helping support expectations that inflation is easing, as did U.S. data from Thursday, which did not show any dramatic impact from U.S. tariffs, helping both shares and bonds.
U.S. core retail sales were soft and the producer prices fell unexpectedly in April, as markets added to the bets for a total easing of 57 basis points from the Federal Reserve this year, from 49 bps before.
"The relief from softer U.S. retail sales and PPI was palpable in the bond market yesterday and overnight," said Kenneth Broux, head of corporate research FX and rates at Societe Generale.
"This poured cold water on the (global) bond sell-off and put the brakes on the hawkish repricing of the Fed outlook."
The benchmark 10-year Treasury yield fell 4 basis points to 4.41%, extending a 7-bps drop overnight, and euro zone government bond yields also slid.
Of course, it might be just a matter of time before the tariff impact starts to show up in the hard data. Walmart , the world's largest retailer, said it would have to start raising prices later this month due to the high cost of tariffs.
Lower U.S. yields left currency traders selling the dollar, if not too dramatically. It was last down 0.27% on the yen at 145.3, while the euro was 0.12% higher at $1.1198.
In precious metals, gold prices fell 1.23% to $3,200 an ounce, after rallying 2% overnight. For the week, they are down 3.7%.
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