Investors weigh risks and prospects

World stock markets are showing stability ahead of the release of a key US employment report, which could significantly affect investor sentiment. Despite ongoing tensions in international trade, optimism is gradually returning as market participants hope that a full-scale economic conflict can be avoided.

At the same time, the Japanese yen strengthened to its highest level in two months amid expectations that the Bank of Japan may raise interest rates later this year.

Trade war and volatility

The past week began with increasing market turbulence. US President Donald Trump officially announced the introduction of trade tariffs on China, which made investors cautious. However, the decision to give Canada and Mexico a one-month reprieve partially eased the situation. Anxiety about further developments has led market participants to prefer a wait-and-see approach, without taking decisive steps. Ahead is the publication of important macroeconomic data that could change the balance of power.

A fateful employment report

Today, the key event for markets will be the publication of data on non-farm payrolls in the US. Experts predict an increase of 170 thousand jobs, but analysts warn that extreme weather events - severe frosts and wildfires in California - can significantly distort the figures, making the range of forecasts especially wide.

Impact on Fed policy

According to Derek Halpenny, chief currency strategist at MUFG, in recent weeks, investors have focused on Trump's economic policy, in particular his protectionist measures. However, today's employment data could be a decisive factor in forming expectations for the further actions of the Federal Reserve.

"It would take a significant divergence from forecasts for the report to have a significant impact on market sentiment," Halpenny said. "However, extreme weather conditions earlier in the year have caused sharp deviations in NFP data in the past, and this report could follow that trend." Investors will now be focused on the upcoming release, which could determine the future trajectory of stock markets and the forex sector.

European stocks continue to rise, but can they maintain the momentum?

European stocks have shown incredible resilience, with the STOXX 600 index closing in positive territory for the seventh week in a row. Although it has remained largely unchanged in the current trading session, this does not change the fact that it hit all-time highs earlier in the week. Optimism in the markets has been supported by strong corporate earnings: Danish pharmaceutical giant Novo Nordisk surprised investors with sales of weight loss drugs, SAP showed strong growth figures, and French financial holding BNP Paribas pleased the markets with stability.

European stock markets have outperformed Wall Street in the first six weeks of 2025, marking their best start in a decade. But now investors face a new challenge: can European indices maintain their gains, or is a correction imminent?

US Futures Under Pressure

Amid ongoing tensions in the tech sector, Nasdaq and S&P 500 futures showed a slight decline of about 0.1% on Friday. The main reason was the negative reaction of investors to the decline in Amazon shares in the European trading session. The weakening of the retailer's positions is associated with the disappointing dynamics of its cloud division, which caused concern among market participants.

Chinese Stocks and the AI Investment Boom

Asian markets, on the other hand, experienced a real tech boom. The main driver was the active participation of Chinese retail investors, who massively bought up shares related to artificial intelligence. The surge in interest was triggered by news of a breakthrough by Chinese startup DeepSeek, which presented innovative developments in the field of AI. As a result, the CSI300 index, which tracks shares of China's largest companies, ended the day up 0.4%, reaching a monthly high. This strengthened investors' confidence that the Chinese stock market continues to recover.

Beijing Maintains Room for Dialogue

Despite ongoing differences in trade policy, analysts note that China has so far reacted with restraint to new tariff threats from Donald Trump. This approach leaves room for negotiations, which has noticeably improved the overall mood in the markets. Fears about the development of a full-scale trade war have so far subsided, which has had a positive effect on investment activity.

The Fed and the Prospects for Rate Cuts

Financial markets have already priced in the expectations of the US Federal Reserve cutting interest rates by 43 basis points over the course of the year. At the same time, the rate cut in July has been almost completely priced in by the market, since US regulators are in no hurry to launch a new cycle of monetary easing.

Whether these expectations will be met remains to be seen. For now, the Fed prefers to take a wait-and-see approach, balancing between inflation risks and the need to support economic growth.

Will the markets be able to maintain the momentum?

Stability in European indices, a buoyant Chinese market and ongoing disputes over US trade policy create a mixed picture for global investors. In the coming weeks, market participants will focus on macroeconomic data, corporate earnings and central bank decisions, which could determine the future direction of stock indices.

The US currency holds its ground

The dollar remains largely unchanged, continuing to hold on to its gains. Last year, the US currency strengthened by 7%, which was a result of investors' expectations regarding the aggressive monetary policy of the Federal Reserve. While other central banks began to cut rates, the US Federal Reserve is showing caution, indicating that easing cycles will be rare and cautious.

The yen strengthens amid tight policy of the Bank of Japan

The Japanese yen continues to strengthen, reaching a two-month high. In morning trading, the rate was 150.96 per dollar, which was the highest level since December 10. The Japanese currency has gained more than 2% for the week, its best weekly performance since November last year.

The jump was driven by strong wage data, which has fueled expectations that the Bank of Japan could hike rates at least once more this year. With other central banks around the world focused on easing, such a move makes the yen an attractive asset for investors.

Pound under pressure: Bank of England caution

The pound sterling weakened by 0.1% on Friday, falling to $1.2425. This is a continuation of the decline that began on Thursday, when the British currency lost 0.5% amid the Bank of England's decision to cut interest rates.

Although the regulator has eased monetary policy, it has signaled that further steps will be measured and cautious. Such a tone is keeping investors from actively buying the pound, putting pressure on the rate.

Commodity markets: gold holds near all-time highs

Commodity markets remain stable. Oil prices are showing a slight increase, while gold has consolidated above $2,800 per ounce, which is close to historical highs.

The high interest in the precious metal is explained by the uncertainty in financial markets and ongoing currency fluctuations. Investors view gold as a safe haven asset amid persistent economic risks.

L'Oreal disappoints investors: shares fall

Shares in L'Oreal (OREP.PA) fell by 3.6% after publishing weak financial results. The French cosmetics giant showed the slowest quarterly growth since the pandemic crisis, failing to meet analysts' expectations.

The fall in L'Oreal's quotes negatively affected the personal care sector, which as a whole fell by 0.7%. This signals that even the world's leading brands are facing a slowdown in demand, which may affect the further dynamics of the consumer market.

Markets in anticipation

Currency and stock markets remain in the phase of finding a balance. Investors are focused on the next steps of the Fed, the Bank of Japan and the Bank of England, as well as the dynamics of demand for commodities. As markets try to adapt to the new reality, the main question remains: will the trend of strengthening of the dollar and the yen continue, or will we see a sharp reversal in global economic strategies?

Construction gains: Sweco posts impressive surge

The European construction and materials sector held its ground on the stock market, gaining 1.4%. The main driver of growth was Swedish engineering and consultancy Sweco (SWECb.ST), whose shares soared 7% after publishing a strong quarterly report.

The strong financial results bolstered investor confidence in the construction sector, which is supported by both solid demand and the recovery of European economies from a period of high inflation.

Porsche SE loses ground on weak outlook

Meanwhile, the automotive sector faced pressure. Porsche SE (PSHG_p.DE) shares lost 3.7% after the German luxury carmaker disappointed investors with its 2025 sales forecast.

The company warned that its financial expectations were below market consensus, causing concern among shareholders. In addition, the depreciation of Porsche SE's stake in carmaker Porsche AG (P911_p.DE) could almost double, adding to the negative market reaction.

The development signals potential problems for the premium auto segment, which is facing rising costs, changing consumer preferences and increased competition from electric vehicle startups.

Danske Bank on the rise: record profit, share buyback

The mood is quite different in the banking sector. Danske Bank (DANSKE.CO), Denmark's largest financial institution, posted an impressive 7.1% rise in its stock price, posting an all-time high in annual profit.

An additional catalyst for the rally was the announcement of a DKK 5 billion (US$696.61 million) share buyback program. The move has bolstered investor confidence and confirmed the bank's strong financial position in a changing macroeconomic environment.

Trends and Outlook

Financial and construction companies continue to strengthen their positions in European markets, while the automotive industry faces new challenges.

In the coming weeks, investors will focus on macroeconomic factors, central bank actions and corporate reports, which could set new directions for the stock market.