A look at the day ahead in European and global markets from Rae

Wee

Last week's market turmoil has quickly faded into a distant

memory - at least for now - after a raft of U.S. economic data

this week allayed fears of a deep downturn in the world's

largest economy.

Recession alarm bells have stopped ringing, and investors

seem convinced that the Federal Reserve is no longer behind the

curve in cutting rates.

Market pricing now points to just a 25% chance of a

50-basis-point cut by the Fed next month, down from a 55% chance

a week ago, according to the CME FedWatch tool, after July's

U.S. inflation report pushed back against bets of an outsized

move.

In Asia, Japan's Nikkei was a notable outperformer,

with its 3% rise on Friday putting it on course for its best

week since April 2020 as it tries to reclaim its record high.

Whatever happened last week?

The yen has, meanwhile, fallen nearly 5% from last week's

seven-month peak and last stood near the 149 per dollar level

.

Even as it starts to look cheap once again, the currency's

volatility is causing global investors to rethink the viability

of yen-funded trades.

Stock futures on Friday point to a firmer open in Europe and

the U.S., with UK retail sales data due just as London wakes up.

Expectations are for shoppers to have returned to the high

street in July, after a sharper-than-expected fall in June.

Bets remain for the Bank of England to ease rates at least

once more this year, as inflation pressures subside and the

outlook for Britain's economy for the remainder of 2024 turns

less rosy.

And as most central banks globally look towards lowering

rates, Down Under, the Reserve Bank of Australia (RBA) is slowly

becoming an outlier.

RBA Governor Michele Bullock said on Friday it was premature

to be thinking about rate cuts, adding underlying inflation was

too high and that the board remained focused on potential upside

risks to prices.

Her remarks came after her Antipodean counterpart, the

Reserve Bank of New Zealand, had earlier this week delivered its

first rate cut in over four years.

Key developments that could influence markets on Friday:

- UK retail sales (July)

- University of Michigan U.S. consumer sentiment

preliminary reading (August)

- Fed's Goolsbee speaks

(Editing by Muralikumar Anantharaman)