The tech-led stock rout paused on Friday as traders awaited key US inflation data for clues on the timing of interest-rate cuts amid fears of a sharper-than-expected economic slowdown.
Europe’s Stoxx 600 benchmark rose 0.5%, led by energy and consumer stocks. US equity futures also signaled Wall Street is set to open higher, paring a weekly drop. Treasuries were steady and the Japanese yen traded little changed versus the dollar.
The exodus from technology giants morphed into a broader risk-off retreat this week as investors focused on tepid corporate results and the possibility that a US slowdown requires an aggressive switch to policy easing. Economic figures that beat expectations on Thursday failed to stem concerns, and traders are now awaiting monthly PCE statistics, the last big data point before next week’s Federal Reserve meeting.
In European corporate reports, Mercedes-Benz Group AG’s earnings plummeted 19% in the second quarter as sales of its passenger electric vehicles dropped sharply and demand in China weakened. Meanwhile, Eni SpA increased its full-year profit guidance.
In US markets, the velocity of the tech correction has rattled traders. It took about 20 trading days in 2023 to produce an 8% drop in the Nasdaq index compared with just 10 this time round.
Small caps, meanwhile, have outperformed in a further sign investors are preparing for rate cuts that will support the broader economy.
PCE Gauge
Friday’s data are expected to show spending and income both grew at a solid clip, even as core PCE inflation — the Federal Reserve’s preferred price gauge — slowed to near its 2% target on a three-month annualized basis, Bloomberg Economics predict.
A soft landing for the US economy could slip away if noisy data delay a rate cut beyond September, according to Bloomberg Opinion columnist Mohamed A. El-Erian.
“We certainly think there is a danger that the Fed is reacting slowly,” given the low US savings rate, said Nick Rees, a foreign-exchange analyst at Monex Europe.
Still, “we doubt today’s data will change many minds on the FOMC. We don’t think the Fed has seen enough yet to cut rates next week,” he said.
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