U.S. Stocks Rise in Early Trading

By Riva Gold and Lucy Craymer Features Dow Jones Newswires

Stocks and bonds showed signs of stabilizing on the final day of the second quarter as investors parsed fresh signals on global inflation.

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Futures pointed to 0.1% opening gain for the S&P 500, with shares of Nike Inc. leading gains in pre-market trading after it reported strong sales overseas. The Stoxx Europe 600 rose 0.2%, brushing off widespread declines across Asian markets, as a rebound in the technology sector helped offset a drop in chemicals companies.

While stocks around the world have spent most of the year climbing and government bond yields have remained ultralow, those trends had reversed for most of this week amid pressure on the tech sector and worries that global central banks may be tightening policy faster than previously expected in response to a strengthening economy.

The European Central Bank should make preparations for withdrawing its massive monetary stimulus, a top ECB official said Friday, after comments earlier this week from European Central Bank President Mario Draghi had sent government bond yields and the euro sharply higher amid expectations that a pickup in the region's economy might prompt it to tighten policy.

"We think Europe is finally on track," said Andy Flynn, fund manager at William Blair. Eurozone businesses and consumers were more optimistic in June than at any time since before the global financial crisis, data showed this week.

On Friday, yields on 10-year German government bonds edged up to around 0.457% from 0.451% on Thursday, while Treasury yields rose to 2.280% from 2.270%. Yields move inversely to prices.

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Yields inched a touch higher after data showed the Federal Reserve's preferred inflation gauge, the price index for personal-consumption expenditures, fell 0.1% in May from the prior month while personal consumption expenditures increased a seasonally adjusted 0.1% in May from the prior month, the Commerce Department said.

Government bonds and the euro had paused earlier as data showed the eurozone's annual rate of inflation fell for the second straight month in June to its lowest level in 2017. The euro edged down 0.2% to $1.1413, but was still on track to end the week 2% higher.

"You probably will continue to see core inflation staying below the targeted 2%, which means central banks will probably adjust policy in a very, very slow manner," said Fabrice Théveneau, head of equities at Lyxor Asset Management.

A moderate amount of inflation should be good for equity markets, Mr. Théveneau said, as there is just enough for companies to have pricing power and avoid the risk of deflation, but not enough to force a rapid pickup in interest rates.

Earlier, the global bond selloff had spread to Asia, pushing the yield on Japan's 10-year government bond to its highest in more than three months.

Asian equities declined, echoing losses in the U.S. and Europe on Thursday. Major U.S. stock indexes had slumped amid fresh losses in the technology sector.

In Japan, the Nikkei fell below 20000 for the first time in two weeks before recovering to end down 0.9%. South Korea's Kospi edged down 0.2%, hit by a drop in index behemoth Samsung, while Australia's S&P/ASX 200 slid 1.7% as major bank shares fell.

Friday's stock weakness there might be the result of companies' "squaring up their books," on the last working day of the financial year for a large number of Australian companies, said Grant Williamson, a director at Hamilton Hindin Greene in New Zealand.

The Hang Seng fell 0.8% amid a decline in shares of Tencent, while the Shanghai Composite Index edged up 0.1% as releases of better-than-expected PMI data on both the manufacturing and service sectors helped keep Chinese markets steady.

In currencies, the WSJ Dollar Index was flat following its lowest close since November. The British pound fell 0.2% to $1.2982 as data showed British households suffered the longest sustained decline in disposable income in over four decades. U.K. consumers' mood also soured significantly in June, a survey published Friday showed.

Paul Hannon

contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

U.S. stocks rose Friday, on track to post large gains in the first half of 2017.

The Dow Jones Industrial Average rose 100 points, or 0.5%, to 21387 in early trading. The S&P 500 climbed 0.4% while the Nasdaq Composite added 0.3%. The Dow industrials and the S&P 500 are set to end the first half of the year up more than 8%, while the Nasdaq Composite is on pace for a more than 14% rise.

The Stoxx Europe 600 rose 0.2%, brushing off widespread declines across Asian markets, as a rebound in the technology sector helped offset a drop in chemicals companies.

While stocks around the world have spent most of the year climbing and government bond yields have remained ultralow, those trends had reversed for most of this week amid pressure on the tech sector and worries that global central banks may be tightening policy faster than previously expected in response to a strengthening economy.

The European Central Bank should make preparations for withdrawing its massive monetary stimulus, a top ECB official said Friday, after comments earlier this week from European Central Bank President Mario Draghi had sent government bond yields and the euro sharply higher amid expectations that a pickup in the region's economy might prompt it to tighten policy.

"We think Europe is finally on track," said Andy Flynn, fund manager at William Blair. Eurozone businesses and consumers were more optimistic in June than at any time since before the global financial crisis, data showed this week.

On Friday, yields on 10-year German government bonds edged up to around 0.457% from 0.451% on Thursday, while Treasury yields rose to 2.274% from 2.270%. Yields move inversely to prices.

Yields inched a touch higher after data showed the Federal Reserve's preferred inflation gauge, the price index for personal-consumption expenditures, fell 0.1% in May from the prior month while personal-consumption expenditures increased a seasonally adjusted 0.1% in May from the prior month, the Commerce Department said.

Government bonds and the euro had paused earlier as data showed the eurozone's annual rate of inflation fell for the second straight month in June to its lowest level in 2017. The euro edged down 0.2% to $1.1420, but was still on track to end the week about 2% higher.

"You probably will continue to see core inflation staying below the targeted 2%, which means central banks will probably adjust policy in a very, very slow manner," said Fabrice Théveneau, head of equities at Lyxor Asset Management.

A moderate amount of inflation should be good for equity markets, Mr. Théveneau said, as there is just enough for companies to have pricing power and avoid the risk of deflation, but not enough to force a rapid pickup in interest rates.

Earlier, the global bond selloff had spread to Asia, pushing the yield on Japan's 10-year government bond to its highest in more than three months.

In Japan, the Nikkei fell below 20000 for the first time in two weeks before recovering to end down 0.9%. South Korea's Kospi edged down 0.2%, hit by a drop in index behemoth Samsung, while Australia's S&P/ASX 200 slid 1.7% as major bank shares fell.

Friday's stock weakness there might be the result of companies' "squaring up their books," on the last working day of the financial year for a large number of Australian companies, said Grant Williamson, a director at Hamilton Hindin Greene in New Zealand.

In currencies, the WSJ Dollar Index was flat following its lowest close since November.

--Corrie Driebusch contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

(END) Dow Jones Newswires

June 30, 2017 10:14 ET (14:14 GMT)