Global Markets Balance with Rising Small-Caps, Wild Yen, and Buoyant Sterling

Global markets held steady on Friday, with notable movements including a shift towards small-cap stocks in the U.S., bolstered by lower inflation data suggesting rate cuts. The Japanese yen surged, hinting at government intervention, while sterling rose on upbeat UK economic data and comments from Bank of England policymakers.

Global stocks drifted on Friday, indicating a strong move on Wall Street from big tech stocks to small-cap companies that are expected to benefit from interest rate cuts. MSCI's broad index of world shares remained steady, and futures contracts on Wall Street's S&P 500 and Nasdaq 100 suggested stabilization in early trading.

Futures contracts on the U.S. small-cap Russell 2000 index rose 1%, continuing a strong performance from Thursday, while shares in major tech firms like Apple fell. Traders anticipate easier financing conditions in the U.S. after June inflation unexpectedly dropped to 3%, fueling hopes for a September rate cut.

The Federal Reserve maintained its main funds rate at a 23-year high, but long-term investment institutions believe rates will stay elevated longer, potentially limiting the small-cap rally. Meanwhile, pre-market trading saw a mixed response from major U.S. banks like JPMorgan Chase, Wells Fargo, and Citigroup after their earnings updates.

The dollar remained steady against other currencies and slipped slightly against the yen after a volatile session attributed to potential Japanese government intervention. The Bank of Japan's data hinted at significant spending to bolster the yen, though long-term declines may persist due to Japan's trade deficit and investment patterns.

In Europe, the Stoxx share index hit a one-month high, supported by positive earnings from companies like Addtech and Ericsson. The 10-year U.S. Treasury yield steadied at 4.21% after dropping amid rate cut hopes. Sterling saw a 0.4% rally, heading for its best two-week gain in eight months due to positive Bank of England comments and better-than-expected GDP data.

Global oil prices rose with Brent futures up 0.6% to $85.93 per barrel and U.S. WTI crude 0.8% higher at $83.29 per barrel. Gold decreased by 0.6% to $2,401 per ounce.

(With inputs from agencies.)