GLOBAL MARKETS-European stocks rise as markets stabilise, dollar set for weekly loss

European stock markets picked up in early ‌trading ​on Friday, as market sentiment showed signs of recovery after a sharp drop in tech stocks in the previous session, while the dollar was down and set for a weekly loss. Markets were rattled this week by a combination of worries about higher interest rates and the debt ‌financing structures behind the AI boom, prompting a selloff in technology and chip stocks. Traders stepped up their bets on US rate hikes after data on Wednesday showed more inflation than expected, and bond yields plunged as investors bought Treasuries and other safe-haven government bonds.

Stocks mostly rose in Asian trading and bond markets stabilised, as markets pulled back from the previous session's moves. Equities in Indonesia saw their biggest losses since ‌1998 after index provider MSCI said the stock market there no longer merited "emerging market" status and set out a plan to remove it from various indexes tracked by funds. If the country ‌is removed, it will lose out on billions of dollars of passive investment inflows.

At 0914 GMT, the MSCI World Equity Index was up 0.3% on the day but still set for a weekly loss. European stocks - which had been hit less hard by Thursday's selloff - were mostly higher, with the STOXX 600 up 0.6% on the day , Germany's DAX up around 1% and France's CAC 40 up 0.1%. London's FTSE 100 was flat. US stock futures also pointed to a recovery ⁠on Wall Street, ​but investors remained worried about credit risks building in ⁠the AI trade, particularly in heavily indebted data centre operators like CoreWeave, which had sparked Thursday's selloff.

"The question of monetization to me is still the big question that is not fully answered. There are still some doubts about the sustainability of ⁠the profits and the margins from some actors in the sector," said Amelie Derambure, senior multi-asset portfolio manager at Amundi in Paris. Still, Derambure said she had an overweight position on US equities and was confident that ​earnings season in the US would be strong enough to limit any market correction.

DOLLAR FALLS, BONDS RECOVER The US dollar was down 0.4% on the day, with the dollar index at ⁠101.68, on track for its first weekly fall after three weeks of gains, as lower US yields made the currency less attractive. Further worries about AI would push the dollar down further, analysts said.

The dollar drop helped lift the euro from ⁠its ​recent 17-month low. The euro was last at $1.1255, up 0.3% on the day . European government bond yields rose on Friday, with the 10-year German yield at 3.4189%. Still, yields - which move inversely to price - were overall down on the week, as concerns about AI-related companies' finances made government debt more attractive to investors. Bonds in G7 countries are on track for their strongest week since late ⁠May.

The correlation between German government bond yields and the STOXX 600 turned positive this week for the first time since August, suggesting that government debt is re-finding its safe-haven appeal, which had ⁠been weakened this year as the war in Iran ⁠forced investors to price in the prospect of higher borrowing costs and higher yields. Oil prices eased on Friday, with Brent crude futures at $105.22 a barrel, but still on track for a weekly gain due to uncertainty about oil supplies from the Middle East. Attacks around the Strait of ‌Hormuz have surged in the ‌past 10 days.

The weaker dollar helped gold prices edge higher, at around $4,187.43.