European stocks look set to cap a strong week with gains, as upbeat earnings helped sustain the rally sparked by a US-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 per cent on Friday, and was up 1.6 per cent on the week, set for its fifth straight week of gains, helped by luxury group Richemont’s seven per cent climb after it reported strong quarterly sales.
MSCI’s main gauge of Asia-Pacific stocks ex-Japan rose more than three per cent this week, and the S&P500 is up 4.5 per cent, with futures pointing to further gains at Friday’s open.
The US data calendar is lighter for the rest of the day, though there will be the University of Michigan consumer sentiment survey and US 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 US 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 two per cent fall on Thursday, and were set to end the week just 0.8 per cent higher.
Oil prices – low by recent standards – are helping support expectations that inflation is easing, as did US data from Thursday, which did not show any dramatic impact from US tariffs, helping both shares and bonds.
US 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 in 2025, from 49 bps before.
“The relief from softer US 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 four basis points to 4.41 per cent, 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 in May due to the high cost of tariffs.
Lower US yields left currency traders selling the dollar, if not too dramatically.
It was last down 0.27 per cent on the yen at 145.3, while the euro was 0.12 per cent higher at $1.1198.
In precious metals, gold prices fell 1.23 per cent to $US3,200 an ounce after rallying two per cent overnight.
For the week, they are down 3.7 per cent.
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