Investors around the world retreated from the stock market on Friday to lock in profits after a strong week. The MSCI global stock index lost 0.2%, and Japan's Topix index fell 0.9% after hitting a record high on Thursday. In Europe, in early trading, the STOXX 600 sgare index fell 0.5%.
Markets are now focused on several significant events next week. Investors are getting the jitters over President Trump's August 1 deadline for new trade tariffs with Europe and China. Meanwhile, central banks, including the U.S. Federal Reserve and the Bank of Japan, have meetings scheduled where policy moves are expected.
Inflation and Tariffs Worry Investors
While American economic data is strong, the positive benefits of both high inflation and tariffs, it's said, could dissipate soon. "If prices remain high, we might get some surprising behavior from people who choose to spend less," said UBS economist Dean Turner. Others, such as Van Luu of Russell Investments, think the recent strength may be just spending ahead of time before prices increase as a result of tariffs.
U.S. government bond yields were little changed, with 4.41% on 10-year Treasuries and 3.92% on 2-year Notes. These rates show that investors are waiting for hints from the Fed about future interest rate cuts.
President Trump unexpectedly visited the Fed on Thursday, which is seen as an unusual move. While he has said that he does not intend to fire Fed Chair Jerome Powell, tensions persist.
Company Earnings and the Central Banks
American companies, including Alphabet (Google's parent company), helped lift the Nasdaq to a record high on Thursday. But stock futures are indicating that Wall Street may hold steady at the start of trading today. Big earnings from Amazon, Apple, Meta, and Microsoft are expected next week and could lift markets.
Meanwhile, the European Central Bank (ECB) held off on cutting interest rates this week, also to evaluate the impact of U.S. trade policy. Germany Bond yields climbed to their highest level since March in Germany. Government bond yields in Japan remained near 1.6%—their highest level since 2008—as pressure grows on Prime Minister Ishiba following his party's electoral defeat.
Oil rises, and gold slips
Commodities: Oil prices rose as optimism increased for additional trade agreements that would bolster the global economy. Brent crude added 0.7% to $69.65 a barrel. Gold, meanwhile, dipped 0.3% to $3,356 an ounce as appetites for safe assets moderated.
