AI anxiety temporarily recedes, tech stocks rebound, European stocks hit new highs for two consecutive days, Brent oil rebounds for two days but falls for four consecutive weeks

Global stock markets rose broadly on Friday, as fears over AI valuations subsided, pushing European benchmark indices to record highs and marking their best weekly performance since May. Lower expectations of a Federal Reserve rate hike boosted gold and weakened the dollar, further improving the overall risk asset environment.

On Friday, U.S. markets were closed for a public holiday, but Nasdaq 100 futures rose 1%, as the shadow of a severe sell-off in chip stocks over the previous two days began to lift. The Euro Stoxx 600 index closed up 0.69%, hitting a 52-week high and climbing for a fourth consecutive week, with utilities leading gains at 1.78%.

Asian markets also strengthened, with the MSCI Asia Pacific index rising 1.9%. South Korea's memory chip giant SK Hynix and Samsung Electronics both rebounded, driving the KOSPI index up 5.76%.

The market's warming was partly due to a repricing of Federal Reserve policy expectations. U.S. June employment data unexpectedly weakened significantly, coupled with falling oil prices, easing concerns about sustained inflation. The first fully priced 25-basis-point rate hike by the Fed was pushed back from October to December.

Gold benefited, with spot prices rising about 1.2% to around $4,170 per ounce, the highest in nearly two weeks, while the dollar was on track for its worst weekly performance since May.

AI Trading Turmoil: Chip Stocks Stabilize After Two-Day Rout

This week, U.S. June employment data fell well below expectations, and recent declines in oil prices weakened the narrative of rising inflation, significantly reducing the likelihood of aggressive Fed tightening.

On Friday, funds flowed back into tech-related sectors. SK Hynix, Samsung Electronics, and Kioxia all surged over 10% in Asian markets.

On Friday, the Stoxx 600 closed up 0.69%, hitting an all-time high and rising for four consecutive weeks. Germany's DAX index led major European markets, gaining 0.85%; Italy's FTSE MIB rose 0.77%; France's CAC40 added 0.48%; and the UK's FTSE 100 edged up 0.19%.

Latin American markets also benefited from cooling Fed rate hike expectations. The MSCI Latin America stock index rose 0.71%, and the regional currency index gained 0.4%, both posting modest gains in the first week of the third quarter.

Notably, the currency index had previously risen for six consecutive quarters, the longest winning streak since 2009.

Brazil's Bovespa index rose 0.97%, and Colombia's COLCAP index gained 0.92%, with the Colombian peso on track for a seventh straight weekly gain.

Mexico's market faced relative pressure, as the Trump administration this week refused to extend the USMCA, triggering a 10-year expiration countdown under the agreement, causing Mexican stocks to fall for a third consecutive week.

Hasnain Malik, head of geopolitical risk and emerging market equity strategy research at Tellimer, said the failure to renew the USMCA "is negative for Mexico, increasing uncertainty about long-term foreign direct investment returns in manufacturing."

But he also noted:

The U.S. approach is far milder than the worst-case scenario—avoiding an outright collapse of the USMCA.

Goldman Sachs equity strategist Tim Moe said in a Bloomberg Television interview:

Fundamentals remain very, very strong, and the market is still underpricing them. The positive earnings environment for memory chip stocks and the entire AI hardware supply chain still has a long way to go.

Dollar Under Pressure, Gold Strengthens

In the currency market, the U.S. dollar index briefly approached the two-week low set after the nonfarm payrolls data, before erasing losses and stabilizing. The dollar weakened over the week, heading for its worst weekly performance since May.

The Japanese yen fluctuated between gains and losses, initially hitting a two-week high before turning lower, weakening past 161 against the dollar. Market expectations regarding Japanese authorities' intervention in the currency market diverged, with speculative sentiment making yen trends more complex.

Cryptocurrencies continued to climb, with Bitcoin breaking above $62k during the day, up over 2% from its intraday low, and Ethereum gaining more than 10% over the week.

Gold benefited from declining real interest rate expectations, with spot prices rising about 1.1% to $4,168 per ounce, as the relative appeal of non-yielding assets increased amid lower rate expectations. Gold rebounded over 2% for the week, snapping a four-week losing streak.

Matthew Ryan, head of market strategy at Ebury, said:

Unless we see clearer signs that rising energy prices have passed through to core inflation, we believe the Fed will choose a cautious tightening path.

Oil markets were relatively stable, with Brent crude steadying around $72 per barrel, as the market weighed the supply outlook for the Strait of Hormuz and progress in U.S.-Iran talks.

Risk Warning and Disclaimer

        Markets carry risks, invest with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Any investment decisions based on this article are at your own risk.