Stocks head for best week of 2024 as wild summer ride continues

Global stocks headed for their best week since November 2023 after encouraging US economic data soothed fears of an imminent recession, in a rapid shift from a rout last week that kept investors wary of a bumpy ride ahead.

MSCI's main world stock index hurtled towards an almost 4 per cent gain over five trading days, recovering strongly from market turmoil last week generated by US recession fears and foreign exchange gyrations.

Europe's STOXX share index rose moderately in early dealings on Friday and headed for a 2.3 per cent weekly rise, with Asian shares outside Japan notching up similar gains and US stock futures heralding a blockbuster week for Wall Street.

The US stock volatility index, broadly considered the market's fear gauge, sat at benign levels of about 15 after hitting a four-year high of 65 early last week.

The sharp turnaround in market sentiment came after a batch of US data this week showed inflation was moderating but retail spending was robust.

That has helped the market narrative move away from recession concerns, sparked by a weak US jobs report in early August, to confidence the economy can keep growing as price pressures ease. Softer inflation data has reinforced expectations of a Fed rate cut in September.

This so-called soft landing scenario may not hold, Aviva Investors multi-asset portfolio manager Sotirios Nakos cautioned, who suspected markets could keep swinging with every new economic data point.

"The market went very quickly to price more negative data and now what we're primarily seeing is the rapid unwinding of that," he said.

"I do not think a lot of money has participated in this bounceback," he added, noting that thin summer trading conditions in August would have exacerbated market moves.

S&P 500 futures rose 0.12 per cent to put the blue chip share index on course for an almost 4 per cent weekly gain. Contracts tracking the tech-heavy Nasdaq 100 also rose.

Markets expect the US Federal Reserve to lower borrowing costs from a 23-year high next month but have reduced their bets of an emergency 50-basis-point cut to 25 per cent from 55 per cent a week ago, the CME FedWatch tool showed.

"The totality of data tells us disinflation is continuing and the Fed is almost certain to cut rates in September by 25 bps," said David Chao, Invesco's global market strategist for Asia Pacific ex-Japan.

"But I do believe that the July inflation report diminishes the chances of a super-size cut."

In Asia on Friday, Japan's Topix jumped nearly 3 per cent and Hong Kong's Hang Seng Index rose 1.8 per cent.

The Topix was poised for a weekly gain of almost 8 per cent, its best performance since March 2020, following heavy losses last week after a surprise Bank of Japan rate cut sent the yen soaring against the dollar, wrecking yen-funded stock trades.

The Japanese currency eased to 148.96 per dollar , on Friday, languishing near a two-week low of 149.40 hit in the previous session and some distance away from last week's seven-month peak.

Elsewhere in currency markets, the Swiss franc , which also surged last week on the back of a flight to safe-haven assets, looked set to lose about 0.7 per cent for the week.

The euro struggled to break above the level of $1.10 against a firmer dollar, which was buoyed by Thursday's retail sales report.

Government bond trading was lacklustre, meanwhile, as a return to confidence sapped demand for safe-haven government debt securities.

The two-year US Treasury yield , which rises as the price of the debt falls and tracks interest rate expectations, hovered near its highest in more than a week, to last stand at about 4.087 per cent. The benchmark 10-year yield , which influences debt pricing worldwide, was 2 basis points (bps) lower at 3.907 per cent.

Germany's equivalent bund yield was steady at 2.252 per cent. Brent crude futures dipped 0.3 per cent to $80.82 per barrel on Friday while US West Texas Intermediate crude futures eased 0.4 per cent to $77.84 a barrel. Both benchmarks also headed towards weekly rises of more than 1 per cent.

Spot gold rose 0.3 per cent to $2,462 an ounce.