Stocks Surge on Positive Economic Data

U.S. and global stocks rose on Friday following encouraging economic data, easing recession fears. The Dow Jones, S&P 500, and Nasdaq showed weekly gains. Positive U.S. data on inflation and retail spending bolstered market sentiment. However, volatility remains, with attention on future Fed rate cuts and upcoming events like the U.S. presidential election.

U.S. and global shares surged higher on Friday, driven by encouraging economic data that eased recession fears. The Dow Jones Industrial Average rose 0.14%, bringing its weekly gain to 2.7%, while the S&P 500 increased by 0.13%, and the Nasdaq Composite added 0.25%, marking weekly gains of 3.7% and 5%, respectively.

MSCI's main world stock index climbed 0.43%, adding to its recovery from last week's market turmoil caused by U.S. recession fears and currency fluctuations. Europe's STOXX share index rose 0.3% on Friday and was on track for a weekly rise. The VIX U.S. stock volatility index, known as the market's fear gauge, remained at benign levels of about 15, down from a four-year high of 65 last week.

The shift in market sentiment followed U.S. data indicating moderating inflation and robust retail spending, shifting the narrative from recession concerns to economic growth confidence. Softer inflation data also strengthened expectations of a U.S. Federal Reserve interest rate cut in September.

On Friday, a survey showed improved U.S. consumer sentiment in August, influenced by developments in the presidential race, while inflation expectations remained stable. Sotirios Nakos, Aviva Investors multi-asset portfolio manager, warned of potential market volatility with each new economic data release.

As central bankers prepare to meet in Jackson Hole, Wyoming, next week, traders anticipate a reduction in Fed borrowing costs, but expectations for a 50-basis-point cut have decreased. Invesco multi-asset fund manager David Aujla stated that while a U.S. recession is unlikely, market volatility will persist, especially around the November presidential election.

Lower U.S. Treasury yields on Friday, following resilient consumer and inflation data, suggest the Fed has room for a small rate cut next month. The 10-year Treasury note yield fell 2 basis points to 3.902%.

In Asia, Japan's Nikkei share average surged 3.6% on Friday, achieving its best week in over four years, while Hong Kong's Hang Seng Index rose 1.9%. Japanese stocks rebounded after the previous week's losses triggered by a surprise Bank of Japan rate cut.

The dollar weakened against the yen and other major currencies amid disappointing U.S. housing data, while oil prices fell, with Brent crude slipping to around $80 a barrel due to weak Chinese economic indicators. U.S. crude lost 1.78%, falling to $76.77 a barrel, and Brent decreased to $79.81, down 1.52% on the day. Spot gold rose by 1.6%.