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

Share markets continue to defy gravity. Wall Street closed at yet another record high as investors latched onto positive economic signals, spurring a rally in most Asian markets that looks set to continue in Europe.

But a new source of worry has cropped up in Japan, where an upper house election on Sunday threatens the majority of Prime Minister Shigeru Ishiba's ruling coalition. The heightened political risk is weighing down Japanese shares, bonds and the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan hit its highest since late 2021 but Tokyo's Nikkei slipped 0.3%, while the yen was headed for a second straight week of losses, down about 0.7% to 148.45 per dollar and near a two-month low.

Yields on 10-year JGBs slipped 1 basis point to 1.545% on Friday but have not strayed far from a 17-year high of 1.585% hit earlier in the week.

European share markets are set for a higher open, with EUROSTOXX 50 futures up 0.3%.

Japan's Sunday election could be its most consequential upper house election in years, potentially adding to political instability at a time of uncertainty over interest rates, mounting concerns about fiscal sustainability and little progress in trade talks with the U.S.

Japan's core inflation slowed in June but stayed above the central bank's 2% target, highlighting the cost-of-living challenge that has been plaguing Ishiba.

Apart from that, investors appear pretty happy with a still-resilient U.S. economy and robust corporate earnings. Wall Street futures are a tad firmer while results at Netflix exceeded forecasts, in part due to a weaker dollar, which could bode well for corporate America's export earnings.

The economic and event calendars are mostly barren for the rest of the day. Fed Governor Christopher Waller reiterated his support for a rate cut at the end of this month, citing mounting risks to the economy.

Fed funds futures, however, imply next to no chance of a move on July 30, while a September rate cut is just about 60% priced in. Total easing of 45 bps is expected this year.

Key developments that could influence markets on Friday:

-- Germany PPI for June

-- German Finance Minister Lars Klingbeil and Bundesbank President Joachim Nagel speak on the sidelines of the G20 meeting in Durban

-- U.S. University of Michigan Consumer Sentiment survey