A look at the day ahead in U.S. and global markets by Mike Dolan
Punch-drunk from a bombardment of central bank decisions this week, world markets attempted to stabilise on Friday as fear of an aggressive Federal Reserve was offset by a more dovish Bank of Japan and relatively soothing September business readouts.
But with the Fed now seen as the most hawkish G4 central bank on the block - as it forecasts yet another rate hike just as markets bet the European Central Bank and Bank of England are done - the dollar has resumed its steady climb to 6 month highs.
A diary of key Fed speakers on Friday may now be critical in calming the horses as markets have run scared at the "higher for longer" message, the real prospect of another hike this year and fewer cuts in 2024.
Fear of the Fed saw 10-year U.S. Treasury yields soar to their highest in 16 years on Thursday and the S&P500 hit its lowest levels since June. World stocks captured by MSCI's all-country index recorded their worst day of the year so far - dropping 1.69%.
The mood was better on Friday - helped by an early rally in Chinese stocks that seemed to riff off hopes for a turn in dour economic picture there and the fact interest rates are going in the opposite direction. Data showing seven consecutive weeks of foreign outflows from country showed not all is well yet.
Wall St futures tried to retain a toehold in positive territory ahead of the open but the VIX volatility gauge held close to one-month highs above 17.
Japan's relatively calm monetary policy stance helped more generally, however.
The Bank of Japan maintained ultra-low interest rates on Friday and its pledge to keep supporting the economy until inflation sustainably hits its 2% target, suggesting it was in no rush to phase out its massive stimulus programme as some investors had suspected.
The yen fell back again but the dollar/yen rate remained below Thursday's 2023 high of 148.45.
European stocks were more mixed as flash September business surveys for the euro zone showed an ongoing contraction of overall activity this month - but at a slower pace and better than forecast. The euro briefly touched a new 6-month low before steadying.
Sterling and UK government bond yields continued to be the big mover as markets bet the Bank of England's decision to halt its rate rise campaign on Thursday meant peak rates are now in.
That view was reinforced on Friday by news UK retail sales rebounded by less than expected in August and another gloomy reading from this month's business surveys.
The pound hit its lowest level since March and 10-year British gilt yields fell to their lowest level since July.
Elsewhere, oil prices nudged higher again on Friday as concerns that a Russian ban on fuel exports could tighten global.
There was better news on the deals front.
Microsoft (NASDAQ:MSFT)'s restructured $69 billion acquisition of Activision Blizzard (NASDAQ:ATVI) "opens the door" to the biggest ever gaming deal being cleared, Britain's antitrust regulator said on Friday. The Competition and Markets Authority said the Ubisoft divestment "substantially addresses previous concerns".
Also on Thursday, Cisco Systems (NASDAQ:CSCO) agreed to buy cybersecurity firm Splunk (NASDAQ:SPLK) for about $28 billion in its biggest-ever deal to strengthen its software business and capitalize on the boom in artificial intelligence.
The deal, which is the biggest technology transaction of the year, lifted Splunk 20% but knocked Cisco shares back 4%.
Shares in Fox Corp and News Corp (NASDAQ:NWSA) rose on Thursday after Rupert Murdoch said he was stepping down as the chairman of both companies, ending a more than seven-decade career during which he created a media empire spanning Australia, Britain and the United States.
And in emerging markets, India's government bonds got a major boost as JPMorgan said it will include India in its widely tracked emerging market debt index.
Key developments that should provide more direction to U.S. markets later on Friday:
* S&P Global flash September business surveys for the United States and around the world
* Federal Reserve Board Governor Lisa Cook, Boston Fed President Susan Collins, Minneapolis Fed chief Neel Kashkari and San Francisco Fed chief Mary Daly all speak