Global markets were volatile on Friday, with stocks seeing a modest rebound while the bond market remained under pressure following a significant sell-off the previous day. This was due to the Middle East conflict prompting a reassessment of inflation and interest rate trajectories.
The European STOXX 600 Index rose by about 0.4%, although it is still set to record a weekly loss. U.S. stock index futures declined, indicating that market sentiment remains cautious.
In the bond market, yields remained elevated. Germany's two-year government bond yield increased by more than 57 basis points this month to 2.58%, while the UK's two-year yield rose to 4.44%, with a monthly gain of nearly 92 basis points.
Markets are repricing policy paths. Traders expect the Federal Reserve to hold rates steady this year, while increasing bets on rate hikes by the Bank of England and the European Central Bank.
Energy prices remain high, with Brent crude nearing $110 per barrel, reinforcing inflation expectations. The dollar index edged up slightly, with precious metals also strengthening in response.
