Global Markets Rebound Amid Rate Cut Bets

European shares and U.S. stock futures rebounded on Friday as markets stabilized after a rough week. The U.S. personal consumption expenditures index showed slight cooling in inflation. Traders maintained bets on Fed rate cuts. Cool economic data led to a shift from tech to smaller companies closely tied to the economy.

European shares and U.S. stock futures showed a strong rebound on Friday, signaling market stabilization after a tumultuous week where global equities fell nearly 2%. The dollar also regained some ground against the yen. Notably, the U.S. personal consumption expenditures index, the Federal Reserve's preferred inflation gauge, indicated a slight cooling, dropping to 2.5% year-on-year in June. Despite these fluctuations, traders' expectations of two or three Fed rate cuts this year remained unchanged.

S&P 500 futures rose by 0.72% following a 1.9% decline for the week, while Nasdaq futures, which have seen a 7% drop over two weeks, gained 1%. Europe's STOXX 600 index also saw a 0.58% rise, putting it on track for a 0.4% gain for the week after a significant loss the previous week. Analysts attribute the shifts to investor interest moving from big tech to smaller companies that are more tied to the economy.

The Japanese yen, after a strong rally this week, eased back ahead of upcoming Bank of Japan and Federal Reserve decisions. The dollar gained 0.3% against the yen, and while the dollar index remained stable, the euro saw a slight increase. Investor moves are driven by expectations of Fed rate cuts and potential rate hikes in Japan. The yen had surged earlier due to suspected BOJ intervention and speculator short-covering.