Rise, rise, rise—all has changed overnight!

Source: Wall Street Intelligence Circle

Global markets extended their gains on Friday, and optimism returned:

- Asia-Pacific stocks rose across the board, the Korean stock market saw a sharp rebound, European stocks hit fresh record highs, and U.S. stock futures edged up—funds started to seek out risk assets again;

- Gold prices rose for a third consecutive trading day, closing at a two-week high;

- The U.S. Dollar Index edged down, still below the 101 level;

- Oil prices recovered slightly, with U.S. crude remaining below $70.

First, it’s still the pattern of “dollar weakens, everything else rallies”; the market is shedding the “rate hike fears” ahead of nonfarm payrolls, now seeing a roughly 45% chance of a Fed hike in September (already less than 50%). For now, the market is choosing the “sweet side of a weak NFP” rather than its “bitter side.” Liquidity has returned: the dollar is weakening, rate hike expectations are receding, and global liquidity pressures are easing. Whether cooling employment means greater growth risks will be left for next week’s discussion.

Second, the strong rebound in Korean stocks is significant for global markets—it signals that forced liquidations and mechanical selling have not further spread. However, this does not mean that the risks around AI have been resolved; it merely means the first wave of deleveraging has stopped the bleeding, and the market has moved from extreme fear to more normal volatility. The bleeding has stopped, but the wounds remain.

Third, what really determines the market’s next move will be—whether CPI confirms the cooling seen in nonfarm payrolls. If CPI also cools, the market will continue trading on the theme of “no Fed rate hikes”; if CPI runs hot, the market will be caught again in the confusion of weak job growth and sticky inflation.

If CPI continues to cool, the market will take weak nonfarm payrolls as a good thing—a reason for the Fed not to hike rates. The dollar will continue to weaken, gold will remain strong, and global stock markets will benefit further. If CPI runs hot, the market will once again face the hardest scenario: weaker employment without inflation relief—which means “slower growth, but no policy easing.” In this case, the dollar could rebound, U.S. Treasury yields would rise, and stocks would shift from a rebound scenario to a stress test.

The market isn’t fully optimistic yet, it’s just catching its breath as the dollar declines.