Gold rose along with an index for Asian equities. Oil was steady as investors braced for the summit between the US and Russian presidents in Alaska later Friday. Futures for the S&P 500 gained 0.2% and that for European stocks advanced 0.4%.
Shares in Hong Kong weakened 1.2% after data showed China’s economy slowed in July with factory activity and retail sales disappointing, suggesting Donald Trump’s trade war is starting to weigh on the world’s No. 2 economy. Japanese shares rose 1% after the country’s economy expanded faster than expected last quarter.Risk sentiment had been buoyed in previous days by expectations of monetary easing in the US, with traders fully pricing in a quarter-point reduction. But with US wholesale inflation accelerating in July by the most in three years, traders trimmed the odds of a September rate cut to about 90% from previously fully pricing it in.
“Markets shouldn’t take for granted that rates will be cut deeply because there is an inflation problem in the US,” said Kyle Rodda, a senior market analyst at Capital.com in Melbourne.The higher-than-expected increase in the US producer price index — which suggests companies are passing along elevated import costs tied to tariffs — halted a Treasuries rally and surprised investors.
Traders had piled into bets on a September rate cut, with some wagering on a 50-basis-point move, after a largely benign report on consumer prices this week and comments from Treasury Secretary Scott Bessent in which he said policymakers could bring down borrowing costs as much as 1.5 percentage points.
Meanwhile, production at Chinese factories and mines rose at the slowest rate since November and expanded 5.7% last month from a year earlier. The median forecast of economists in a Bloomberg survey was for an increase of 6%. Retail sales grew 3.7% on year in July, the least this year, down from 4.8% in the previous month.
China’s new-home prices fell at a faster pace in July, in a further sign that a series of stimulus measures has failed to revive the moribund market.
China’s housing slump has dragged on for more than four years, with sales falling further since the second quarter. Calls for additional policy support have grown as the effects of a stimulus blitz last September wear off.
In geopolitical news, Russian President Vladimir Putin sought to strengthen his rapport with Trump ahead of their summit, praising the US leader’s efforts to broker an end to the war in Ukraine and dangling the promise of economic cooperation as well as a new arms control treaty.
