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

Stella Qiu

The week started with a bang but by Friday the risk-on

rally - supercharged by a China-U.S. trade truce - was wearing

thin as traders grew wary that the rebound had overshot and that

more twists and turns lie ahead in the trade saga.

Wall Street and European stock futures are little

changed while Asian shares are mixed. Hong Kong's Hang Seng

index fell 0.8%, weighed down by Alibaba's ( BABA ) more

than 5% tumble after its earnings failed to impress investors.

Australian shares fared better, rising 0.7%.

The stock market now seems to be acting as if the tariff war

never happened. The MSCI's broadest index of Asia-Pacific shares

outside Japan is hovering just below a

seven-month top. Even Chinese blue chips have

recovered all of the losses since April 2 when President Donald

Trump announced "reciprocal" tariffs - since put on hold - on

the rest of the world.

Beaten-down bond markets cheered an unexpected fall in U.S.

producer prices and a soft core retail sales print, prompting

investors to nudge up their rate cut outlook for the Fed,

pricing in a total of 56 basis points in rate cuts for this

year, up from 49 bps.

Ten-year benchmark Treasury yields fell 3

basis points to 4.424% on Friday, extending a 7 bps decline

overnight.

Trump has meanwhile been busy in the past few days

talking up deals in the Middle East, including a potential

nuclear deal with Iran. Trump's comments that a deal was near

sent oil prices tumbling 2% on Thursday.

The broader markets are keen, however, for progress in trade

talks with China and details of more trade deals with other

countries after an agreement with Britain.

Let's not forget tariffs are still a lot higher than before

Trump began his crusade on trade, and the highest since the

1930s.

Walmart ( WMT ), the world's largest retailer, said it would

have to start raising prices later this month due to the high

cost of tariffs, pointing to more pain ahead for U.S. consumers.

Although the latest U.S. price data looked benign, it might

be just a matter of time before the impact of tariffs starts to

show up in the hard numbers that the Federal Reserve has said it

needs to see before considering its response to trade-related

uncertainties.

The economic calendars in Europe and the U.S. are a bit

thin. U.S. releases on Friday include import prices for April

and the University of Michigan consumer sentiment survey, which

might be useful for gauging the impact of Trump's tariff

manoeuvring.

Key developments that could influence markets on Friday:

- University of Michigan consumer sentiment survey

- U.S. import prices for April