Global Stocks Gain, Gold Futures Hit Record

Global stocks gain, gold futures hit record

Market Overview and Economic Factors

By Chris Prentice and Amanda Cooper

Impact of U.S. Interest Rates

NEW YORK/LONDON (Reuters) -Global equities rose on Friday as investors clung to the view that U.S. interest rates may fall further this year, with European shares posting their biggest weekly gain in 12 weeks on strength from banking stocks.

Gold Market Dynamics

U.S. gold futures hit a record high on uncertainty over whether country-specific U.S. import tariffs would apply to the most commonly traded sizes of gold bars.

Geopolitical Influences

Investors watched for signs of a potential Russia-Ukraine ceasefire after a report that the United States and Russia are aiming to reach a deal to halt the war in Ukraine.

President Donald Trump on Thursday moved to reshape the U.S. central bank, nominating Council of Economic Advisers' Chair Stephen Miran for a short-term board seat after Adriana Kugler's abrupt exit.

Miran holds similar views to Trump, who has berated Powell for being "too late" in cutting rates, even though growth is holding up and inflation is ticking higher.

"It locks in a vote for rate cuts at all the meetings between now and the end of January," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

"Markets are already travelling with a very strong expectation that there will be a rate cut," he added. "Though there's a question mark over whether he'll succeed in ratification in time for the September meeting."

Bloomberg News reported that Fed Governor Christopher Waller was emerging as a leading contender for the role of Fed chair.

MSCI's gauge of stocks across the globe rose 0.52%. On Wall Street, the Dow Jones Industrial Average rose 0.47% to 44,175.61, the S&P 500 added 0.78% to 6,389.45 and the Nasdaq Composite climbed 0.98% to 21,450.02. 

The pan-European STOXX 600 index rose 0.2% to finish the week up more than 2% as largely upbeat corporate results and firming bets of more Fed rate cuts lifted prices from last week's five-week lows. 

Shares also saw a lift from optimism that hefty U.S. tariffs that kicked in on Thursday would be subject to negotiation. Zurich's SMI index gained as traders continued to shrug off Switzerland's 39% U.S. tariff coming into effect.

"The effective shock (from tariffs) is there. So the question now is: How is it going to impact the economy and the data, and when? Because up to now, let's be fair, it's been less severe than most have anticipated," Lombard Odier economist Samy Chaar said.

Overall tariffs may be lower than many had feared back in April, but they are at their highest in at least a century.

Relief over lower-than-expected duties may be short-lived as a result. For instance, the European Union now has a 15% tariff rather than the 50% that Trump had threatened, Chaar said.

"That's the vulnerability in the market... It is focusing on the good news, which is not getting the 50%, but getting the 15%. And then the problem is that 15% is actually a big shock and, at some point, it's going to show in the data," he said.

U.S. Treasury yields rose on Friday, with the yield on the benchmark 10-year note poised for its first weekly gain in three weeks after a series of weak auctions.

The U.S. Customs and Border Protection service released a ruling on its website on Friday, which the gold industry interpreted as meaning that country-specific U.S. import tariffs could apply to the most-traded sizes of gold bars in the U.S.

December U.S. gold futures settled 1.1% higher at $3,491.30 per ounce after hitting a record $3,534.10 when the Financial Times first reported the news. 

Spot gold eased 0.08% to $3,394.24 an ounce.

Brent oil futures settled up 0.24% at $66.59 per barrel and U.S. crude settled unchanged at $63.88 per barrel. 

Expectations of a potential truce between Russia and Ukraine had weighed on oil prices earlier in the U.S. trading session. Both benchmarks were also under pressure from a tariff-hit economic outlook and finished with weekly losses.

The yield on benchmark U.S. 10-year notes rose 3.9 basis points to 4.283%.

The Japanese yen weakened 0.44% against the greenback.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.31%, with the euro down 0.23%.

MSCI's broadest index of Asia-Pacific shares outside Japan closed down 0.63%, while Japan's Nikkei rose 1.85%.

(Additional reporting by Gregor Stuart Hunter in Singapore and Nikhil Sharma and Pranav Kashyap in Bengaluru; Editing by Richard Chang, Daniel Wallis and Nia Williams)