Global markets-Global stocks set for biggest weekly fall since mid-July, dollar on the defensive

Concerns over the growing U.S. debt pile drove some investors towards alternatives such as bitcoin BTC=, which has typically benefitted from efforts to diversify away from U.S. assets. Bitcoin scaled a more than two-month high on Friday and was last up almost 6% at $76,446, on track for a 20% weekly rise, which would mark its largest gain in 2-1/2 years. "The dollar has come under renewed pressure, in part due to a resurgent 'debasement' narrative," said Jonas Goltermann, chief markets economist at Capital Economics. "While we continue to think such concerns are somewhat overblown, and that the economic backdrop overall will point to a stronger dollar over the coming months, continued surprises from U.S. policymakers may well matter more in the near term." The dollar fared a little better versus the yen, which has plenty of problems of its own, and held near 159 JPY=EBS. Data showed Japan's core consumer inflation accelerated in July as firms passed on rising import costs, while a survey of manufacturing showed a surge in new orders. Both added to the case for a September rate hike from the Bank of Japan. Markets, however, are already priced for a quarter-point rise to 1.25% and would really like a commitment to faster and more aggressive tightening from policymakers. Bessent also made news by expanding on President Donald Trump's pledge of economic warfare against Iran, saying the U.S. would impose "the toughest sanctions in history" on the country. Iran said on Friday that its response to any new U.S. threats would be "devastating". Dimmed hopes for a deal that would fully reopen the vital Strait of Hormuz pushed Brent to a one-month peak near $95, before profit-taking set in. Brent futures LCOc1 were last off just 0.2% at around $93.5 a barrel, but still up more than 5% for the week, while U.S. crude CLc1 eased 0.3% to $86.56. O/R In currency markets, the dollar was nursing broad losses for the week amid worries that ever-growing U.S. debt and policy uncertainties will erode the purchasing power of the currency, driving investors to scarce assets including gold. The yellow metal was 1.6% higher at around $4,592 an ounce XAU= and touched its highest level in almost three months. GOL/ The dollar index was off 1% for the week at 98.61 =USD, having hit a three-month trough overnight. The euro was up just over 1% on the week at $1.17 EUR=EBS, after touching a 14-week peak. Against the safe-haven Swiss franc, the dollar has slid 1.8% this week, its biggest weekly loss since January CHF=. Citi has revised up its euro/dollar forecast, citing mounting headwinds for the U.S. currency. Upbeat data also supported the euro. Euro zone business activity is growing at its fastest pace this year thanks to stronger new orders, particularly in manufacturing, and renewed export growth, according to business surveys which also showed easing price pressures. Higher yields lift debt costs globally, just as tech giants are borrowing heavily to fund AI capex, while raising the discount on corporate earnings and challenging stock valuations. The strain was evident in the Nikkei .N225, which shed 0.3%, bringing losses for the week so far to almost 4%, on track for the biggest weekly drop since mid-July. South Korea .KS11 and Taiwan .TWII both edged higher, but again were down on the week. European stock markets firmed. Still, the STOXX 600 index was set for its biggest weekly fall since early July .STOXX, down around 1%. MSCI's world stock index was poised for its biggest weekly drop since mid-July .MIWD00000PUS. On Wall Street, a bumper earnings season has provided some support with S&P 500 futures ESc1 up 0.3%, while Nasdaq futures NQc1 gained 0.6%. The AI trade faces a test next week when Nvidia NVDA.O reports, with much riding on its outlook for infrastructure demand and data centre revenue. Walmart WMT.O on Thursday showed what happens when high expectations are disappointed, sliding 9% on a sales miss. Global stocks were set for their biggest weekly fall on Friday since mid-July amid continued strains in global bond markets and a diplomatic deadlock in the Gulf that has lifted oil prices to one-month highs and kept inflation risks in focus. While European shares and U.S. stock futures traded higher, sentiment remained cautious with the dollar weakening. U.S. 30-year Treasury yields resumed their climb after Wednesday's surprise intervention by Treasury brought barely a day of relief from selling sparked by concerns about elevated inflation and fiscal pressures. The rise came even as U.S. Treasury Secretary Scott Bessent said he could further increase the government's repurchases of Treasuries, and floated the idea of fiscal consolidation. Analysts were sceptical he could find enough spending cuts to seriously curb a budget deficit of more than 6% of gross domestic product, with interest charges alone this year running at $1.2 trillion, while the U.S. debt pile just crossed $40 trillion. The dollar hovered near Thursday's three-month lows =USD, with the greenback down 1% this week against other major currencies. "The initial (Treasury buyback) move was quite remarkable because it came totally as a surprise, but the big question is, is this meaningful enough to have a long-lasting impact?" said Christian Hantel, head of global corporate bonds at Vontobel. "We could see the market still trying to test if they're ready to increase from the $4 billion they have announced before. So it could be an interesting couple of days." The U.S. 30-year bond yield was trading at around 5.25% US30YT=RR, while the 10-year was steady on the day at 4.70% US10YT=RR. Markets assume 5.30% on 30-year bond yields is now a pain threshold for Treasury, much like the 160 yen level has become for Japanese policymakers.

Global markets-Global stocks set for biggest weekly fall since mid-July, dollar on the defensive

Bitcoin, the yen and Japan data

Oil, sanctions and currency moves

Equities, earnings and the AI trade

Global stocks and Treasuries under pressure

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