Australia

Australian shares are set to open higher, while Wall Street large tech stocks dropped as small caps gained following inflation reports.

ASX futures were up 0.57% or 45 points at 7,914 as of 8:00am on Friday, suggesting a higher open.

Declines in large tech stocks pulled the S&P 500 lower on Thursday. But the Russell 2000, an index of small and midsize companies, posted a big gain, reflecting enthusiasm about the inflation report. 

U.S. stock indexes ended mixed with the Dow Jones Industrial Average increasing 0.08%. Meanwhile, the S&P 500 Index fell 0.9%, and the Nasdaq Composite Index fell 2.0%.

In commodity markets, Brent crude oil was up 0.54% to US$85.54 a barrel, while gold was up 1.86% at US$2,415.48.

The Australian dollar was 67.57 US cents, up from its previous close of 67.47.

Asia

Chinese shares ended higher on positive sentiment following the China Securities Regulatory Commission tightening controls on short selling and quantitative trading late Wednesday. Almost all sectors closed higher, with consumer services and software stocks leading the gains. China Tourism Group Duty Free Corp. added 6.3% and Shanghai Jinjiang International Hotels gained 4.5%. Among the software stocks, iFlyTek advanced 1.0% and Beijing Kingsoft Office Software rose 2.2%. Bank of China dropped 1.05% and China Mobile was 0.3% lower. The benchmark Shanghai Composite Index ended 1.1% higher at 2970.39, the Shenzhen Composite Index gained 2.35% and the ChiNext Price Index added 2.1%.

Hong Kong shares ended higher, buoyed by technology and auto stocks. XPeng jumped 12% and Li Auto was 7.1% higher, both following their gains on Wall Street overnight. Among the major tech names, Xiaomi advanced 3.5% and Tencent added 1.9%. Investor sentiment was also likely boosted by the Chinese securities regulator's move to tighten rules on short selling. Meanwhile, investors will be watching the U.S. June CPI data due later in the day. The benchmark Hang Seng Index rose 2.1% to 17832.33; the Hang Seng Tech Index gained 2.7%.

Japan's Nikkei Stock Average rose 0.9% to close at a record high of 42224.02 on broad-based gains. The Nikkei has been an outrunner lately, says Yeap Jun Rong, market analyst at IG in a commentary, noting the benchmark index's recent stellar performance. Factors such as renewed strength in the technology sector could be supporting the domestic equity market, the analyst adds. Among top performers on the Nikkei, e-commerce company MonotaRO jumped 13.5%, express delivery services provider SG Holdings rose 4.9%, and pharmaceutical company Eisai added 4.4%. USD/JPY was at 161.73, compared with 161.50 as of Wednesday's Tokyo stock market close. The 10-year JGB yield was down 0.5bp at 1.080%.

India's Sensex closed flat at 79897.34, as gains in bank stocks erased losses in manufacturing shares. All eyes are on the U.S. June CPI and initial jobless claims data due later in the day, after Fed Chair Jerome Powell's remarks to Congress didn't do much to dissuade traders from betting on rate cuts this year, UOB's Global Economics and Markets Research team writes in a note. Among advancers, State Bank of India rose 0.9%, IndusInd Bank gained 0.5% and Kotak Mahindra Bank was 0.4% higher. Decliners included Mahindra & Mahindra, which fell 1.2%, Nestle India, which lost 1.05%, and Sun Pharmaceutical Industries, which was 0.9% lower.

Europe

Stocks in the U.K. rose Thursday, as the FTSE 100 Index rose 0.4% to 8223.34.

Among large companies, Pennon Group PLC was the biggest gainer during the session, surging 9.7%, and RS Group PLC surged 9.6%. Indivior PLC rounded out the top three movers on Thursday, as shares surged 8.1%.

Bytes Technology Group PLC posted the largest decline, dropping 6.1%, followed by shares of Direct Line Insurance Group PLC, which fell 3.0%. Shares of Zigup PLC fell 2.2%.

In other parts of Europe, the STOXX Europe 600 Index gained 0.6% to 519.41 from the previous close, Germany's DAX added 0.69% to 18,534.56 and France's CAC 40 gaining 0.71% to 7,627.13.

North America

Declines in large tech stocks pulled the S&P 500 lower on Thursday. But the Russell 2000, an index of small and midsize companies, posted a big gain, reflecting enthusiasm about the inflation report. Cooling inflation sparked a furious rotation in the stock market as investors trimmed bets on big tech leaders and piled into laggards from industrials to small caps.

Data Thursday showed price pressures easing, deepening the market's confidence that the Federal Reserve would begin cutting interest rates in September. Growing certainty that rate cuts were near at hand drove government bond yields lower and triggered a rush into beaten-down corners of the market that could benefit from falling rates.

The Russell 2000 index of small-cap stocks, which just days ago was flat for 2024, soared 3.6% in its best day since November. Real estate, the S&P 500's worst-performing sector this year, jumped 2.7%, while the utilities and industrials groups advanced 1.8% and 1.3%, respectively.

At the same time, the mega-sized tech stocks that have powered the market to records slumped on the news. The Magnificent Seven collectively lost $597.5 billion in market value, their largest one-day loss since February 2022, according to Dow Jones Market Data.

Chip maker Nvidia slid 5.6% and Facebook parent Meta Platforms declined 4.1%. Google parent Alphabet, Amazon.com, Apple and Microsoft each dropped more than 2%. Tesla retreated 8.4%, snapping an 11-session winning streak, after Bloomberg News reported the company was postponing plans to unveil its robotaxi.

"A lot of those names have performed very strongly over the first half the year," said Sinead Colton Grant, chief investment officer at BNY Wealth. "There is some pent-up demand from investors to diversify more, to look for those names or those sectors that have been less well loved over the first half of the year."

The declines by the market's largest stocks pushed the S&P 500 down 0.9%, ending a streak of six record closes. The tech-heavy Nasdaq Composite retreated 2% in its worst day since April.

The Dow Jones Industrial Average, which doesn't include all the big tech stocks, bucked the trend, to rise 0.1%, or about 32 points.

In one measure of the dramatic divergence within the market, the Russell 2000 notched its biggest one-day lead over the Nasdaq Composite in data going back to 1986, according to Dow Jones Market Data. Small companies tend to issue more floating-rate debt than their larger peers, making the group especially sensitive to changes in interest rates.

The bond market responded at once to the new inflation data. The yield on the benchmark 10-year U.S. Treasury note dropped to 4.192%, from Wednesday's 4.280%.

Small-cap stocks rallied across the market, with Victoria's Secret gaining 6.1%, Outback Steakhouse owner Bloomin' Brands rising 7.1% and motor-home company Winnebago Industries adding 6.7%.

Within the large-cap world of the S&P 500, home builders D.R. Horton and Lennar advanced 7.3% and 6.9%, respectively. Deere shares gained 2.9% and Public Storage shares rallied 3.2%.

Although the decline in big tech stocks meant a down day for the S&P 500, some investors found reason to cheer the shift in leadership. Investors have fretted that the market's reliance on a handful of tech stocks leaves the rally vulnerable.

"Rotation is the lifeblood of a bull market," said Jamie Cox, managing partner for Harris Financial Group. "This is great news."

The S&P 500 is now up 17% in 2024, while the Nasdaq Composite is up 22%.

The rotation kicked off after data showed U.S. inflation eased meaningfully in June. The consumer-price index rose 3% from a year earlier, a touch less than economists had forecast.

The evidence of easing inflation came after Fed Chair Jerome Powell earlier this week laid the groundwork for rate cuts by pointing to a cooling labor market and suggesting that further softening would be unwelcome.

Together, the developments have bolstered investors' view that the Fed will pivot to lowering rates at its September meeting.

Investors are looking ahead to earnings season kicking off in earnest Friday with reports from JPMorgan Chase, Wells Fargo and Citigroup. Delta Air Lines shares fell 4% Thursday after the company reported a sharply lower profit in the second quarter.