A look at the day ahead in U.S. and global markets from Mike

Dolan

After a week of worldwide stock market records, Friday seems set

for a breather - with attention switching to the deepening

Chinese housing bust and sweeping government plans to stop the

rot there.

Thursday's saw the blue-chip Dow Jones briefly top

the 40,000 milestone as the S&P500, Nasdaq and

MCSI all-country index all clocked all-time

intraday highs too.

Signs of U.S. disinflation resuming and the wider economy

cooling all stoked hopes that Federal Reserve interest rate cuts

are indeed coming - with annual corporate profit growth and

year-to-date stock index gains revving up into double digits.

As both a reflection of and spur to the new bullishness, the

VIX 'fear index' of equity volatility subsided to its

lowest level of the year on Friday. And futures held steady

overnight after a modest tick back in the cash market on

Thursday.

But as the Sino-U.S. geopolitical rivalry intensified this

week with new trade tariffs from Washington and the Russia-China

summit in Beijing, market attention switched to the health of

the world's second biggest economy and data showing accelerating

home price deflation there.

Chinese stocks jumped on Friday as the government

announced a series of measures to cut across a housing slump

that's seen new home prices fall in April for tenth consecutive

month and at the fastest pace in almost 10 years - with property

investment so far in 2024 falling almost 10% from last year.

The latest rescue plans allows local governments to buy

"some" unsold apartments, relaxes mortgage rules and pledges to

deliver unfinished homes.

With 4.25 billion square feet of new housing for sale in

January-March, up 24% year-on-year, analysts at Tianfeng

Securities estimate it will cost around $1 trillion to buy the

entire stock.

Separately, the People's Bank of China said it would set up

a $41.53 billion relending facility for affordable housing and

lower mortgage rates and downpayment requirements further.

China's CSI 300 Real Estate index jumped nearly

9% on the announcements, with broader CSI300 and Hong Kong's

Hang Seng both up about 1%. The offshore yuan

weakened slightly.

The extent to which the property sector problems are sapping

the economy were revealed in a further slowing of retail sales

growth there last month to just 2.3%, the slowest increase since

December 2022 and far short of forecasts.

The renewed Chinese export push that unnerves western

governments and is prompting renewed trade tensions saw

industrial production growth beat expectations, however, and

accelerate to an annual 6.7% last month.

Back on Wall Street, part of the subdued end to Thursday's

trading was due to a modest backup in Treasury yields after news

of a pickup in U.S. import price inflation that forms an

important component of the Fed's favored PCE inflation gauge.

Ten-year Treasury yields hovered just under

4.40% on Friday and the dollar was firmer too.

But the wider sweep of U.S. housing, jobless and industry

updates released in parallel showed the economy coming off the

boil - with U.S. economic surprise indexes plumbing their most

negative in 16 months.

Fed officials mostly welcomed the tick lower in consumer

prices this week, but continued to stress patience before

cutting rates. Futures markets are still largely priced for a

quarter point cut by September, with a one-in-three chance of a

move as soon as July.

In corporate results, WalMart ( WMT ) was a standout and its

stock rose 7% after the retail giant raised its fiscal 2025

sales and profit forecast, betting on easing inflation to

further boost demand for essentials.

Friday's diary is mostly bare - with Fed speakers

dominating. AI-bellwether Nvidia's ( NVDA ) results next week

are now in view, while the 'meme stocks' craze of the earlier

part of the week seems to have dissipated again.

In Europe, June interest rate cut hopes remain high but

there was some dampening of easing expectations after that from

European Central Bank board member Isabel Schnabel.

"The path beyond June is much more uncertain," she said.

Key diary items that may provide direction to U.S. markets later

on Friday:

* US April leading index

* Federal Reserve Board Governor Christopher Waller and San

Francisco Fed President Mary Daly speak

(By Mike Dolan; Editing by Toby Chopra;

[email protected])