(Bloomberg) — Stocks were mixed on Friday, with European shares and U.S. futures falling in contrast to gains in Asia, as investors studied the path of interest rates.
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The Bank of Japan grabbed attention after keeping interest rates unchanged while signaling a tightening path as inflation accelerates. The yen fluctuated.
Europe’s Stoxx 600 fell after Mercedes-Benz Group AG slumped 7.7% after cutting its financial outlook for the year. U.S. stock futures edged lower after the S&P 500 hit its 39th record high in 2024 and extended this year’s rise to about 20%. A gauge of Asian stocks rose 0.8%.
The Federal Reserve's bold 50 percentage point rate cut this week has boosted confidence that it can achieve a soft landing for the U.S. economy. Fed policymakers' projections suggest an additional 1.5 percentage point cut is possible by the end of next year.
“Despite the optimism in markets right now, there are clearly still some underlying concerns,” said Jim Reid, a strategist at Deutsche Bank AG. “In particular, futures continue to price in a more aggressive pace of cuts than the Fed’s dot plot implied on Wednesday, so investors think they may need to accelerate those rate cuts if downside risks materialize.”
Traders are also bracing for a quarterly “triple witching” episode, when derivatives contracts linked to stocks, index options and futures will expire, potentially amplifying market moves. About $5.1 trillion will expire on Friday, according to an estimate by derivatives analytics firm Asym 500.
Options expiry coincides with the rebalancing of benchmark indices. This event is known to trigger sudden price movements as contracts are wiped out and traders roll over existing positions or open new ones.
Treasury yields were broadly unchanged on Friday, while the dollar strength index remained in a narrow range. The pound appreciated after UK retail sales in August beat estimates as consumers took advantage of sunny weather and summer discounts.
In Japan, the BOJ raised its assessment of consumer spending and reiterated that it expects price growth to be in line with its target in the second half of its projection period, an indication that it remains on track to raise rates. Data released earlier showed the country’s key inflation gauge accelerated in August for a fourth straight month.
“We remain positive on the yen as a pickup in wage growth and a rebound in inflation should keep the December rally alive,” said Alex Loo, macro strategist at TD Securities in Singapore. “The yen could also prove to be an effective hedging tool for defensive markets as we head into US election uncertainty and rising geopolitical risks.”
In China, the country is considering removing some of the biggest remaining restrictions on home purchases after previous measures failed to revive a moribund property market, according to people familiar with the matter. That sent a Bloomberg gauge of Chinese developers higher.
Meanwhile, the country's banks kept their benchmark interest rates on hold for September as monetary authorities held off on further monetary stimulus while financial institutions struggle with historically low profit margins. The Securities Times reported on Friday that the Fed's rate cut this week has given China room to increase monetary and fiscal stimulus to support the economy.
In commodities, gold held steady near a record high, while oil was on track for its biggest weekly gain since February following the U.S. rate cut.
Key events of this week:
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Eurozone consumer confidence, Friday
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Canadian retail sales, Friday
Some of the main movements in the markets:
Stocks
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The Stoxx Europe 600 was down 0.4% as of 8:17 a.m. London time.
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S&P 500 futures fell 0.1%
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Nasdaq 100 futures fell 0.2%
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Dow Jones Industrial Average futures were little changed
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The MSCI Asia Pacific index rose 0.9%
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The MSCI emerging markets index rose 0.7%
Coins
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Bloomberg Dollar Spot Index little changed
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The euro rose 0.1% to $1.1178.
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The Japanese yen fell 0.2 percent to 142.95 per dollar.
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The offshore yuan rose 0.3% to 7.0493 per dollar.
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Sterling rose 0.4% to $1.3336
Cryptocurrencies
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Bitcoin rose 0.8% to $63,564.01
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Ether rose 3.7% to $2,557.4
Captivity
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The yield on the 10-year Treasury note was virtually unchanged at 3.72%.
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The yield on 10-year German bonds remained virtually unchanged at 2.20%.
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The yield on 10-year British bonds remained virtually unchanged at 3.89%.
Raw materials
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Brent crude fell 0.1% to $74.77 a barrel
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Spot gold rose 0.9% to $2,608.82 an ounce
This story was produced with assistance from Bloomberg Automation.
–With assistance from Winnie Hsu, Richard Henderson and Sagarika Jaisinghani.
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