European markets are predicted to begin Friday robustly. The optimism is driven by proposed U.S. rate cuts as well as encouraging signs of economic recovery in China.
The dollar lost strength and bond yields have dimmed following the positive indicators from the U.S. labor market, further fueling the possibility of Federal Reserve interest rate reductions.
The optimism in the Chinese economy is backed by the recent April trade data that surpassed estimates. In a move to attract buyers, cities like Hangzhou and Xian have lifted restrictions on home purchases.
A broad upward trend across Asian markets is due to shifting expectations on international interest rates. Potential future rate cuts were subtly indicated by both Sweden's central bank, which reduced its key interest rate for the first time in more than eight years, and Governor Andrew Bailey of the Bank of England (BoE).
Ahead of key inflation data due from the U.S. next week, gold kept a price of above $2,350 per ounce. The data will be crucial in determining the Federal Reserve's strategy of maintaining higher rates for a more extended period.
According to futures of federal funds, traders expect a decline in the benchmark interest rate of the Federal Reserve starting in November, though a cut in September might be in the cards.
Oil prices have shown a weekly gain, propelled by the decline in U.S. crude inventories as well as strong Chinese imports.
There is mounting tension in the Middle East, with Israeli attacks on Rafah expanding despite threats from U.S. President Biden to withhold weapons shipments. Egypt is urging both Hamas and Israel to show "flexibility" to enable a ceasefire agreement.
Several factors could impact trading later in the day. These include a report on U.S. consumer sentiment for May, comments by several Federal Reserve officials, and the latest earnings news.
U.S. stocks showed strong gains on Thursday as the number of Americans filing new claims for unemployment benefits last week rose to a level not seen for more than eight months. This spurred expectations for potential rate cuts by the Federal Reserve in the coming months.
The Dow jumped 0.9%, making it seven straight winning sessions and reaching over a one-month closing high. The S&P 500 also rose by 0.5%, and the Nasdaq Composite gained a slight 0.3%.
In Europe, stocks continued their five-day gaining streak on Thursday. The Bank of England holding steady on interest rates but signaling possible summer cuts if inflation remains low acted as a catalyst for the positive trend. The pan-European STOXX 600 rose by 0.2% while German's DAX climbed 1%. France's CAC 40 advanced 0.7%, and U.K.'s FTSE 100 grew 0.3%.
