Turbulent week ends with a gain By Reuters

A look at the day ahead for European and global markets from Stella Qiu.

No one could have predicted how this turbulent week in the markets would end, but surprisingly, just one weekly report on US jobless claims was enough to undo much of the damage, after fears of an impending US recession had sent investors into a panic.

Asian stock markets rallied broadly on Friday, tracking Wall Street’s strong rebound. They rose 1.6% and have recovered most of Monday’s 13% loss, leaving them likely to decline just 1.5% for the week.

As it stands, the yen is set to close this week down about 0.5% against the dollar, after hitting a seven-month high on Monday, triggering the unwinding of yen carry trades that have been a driving force behind the recent global market turmoil.

However, the carry trade is far from dead: JPMorgan estimates that this popular operation is now worth about $4 trillion.

The much-feared story of China’s slowdown is also changing a bit. Consumer inflation data on Friday showed prices rose more than expected in July, following trade data on Wednesday that showed a surprising pick-up in import growth. That suggested there was less risk the world’s second-largest economy could slide into outright deflation.

All of this should contribute to a stronger opening for Europe, with no major economic data, earnings announcements or Fed speakers scheduled for Friday. Both the EUROSTOXX 50 and futures added 0.3%. A decent day would help reverse weekly losses and build on gains.

Now that financial matters are less of a worry, investors may want to keep an eye on the final, tense days of the world’s biggest sporting event as the Paris Olympic Games conclude on Sunday.

Host country France now ranks fourth in gold medal count, behind the United States, China and Australia. And it has a good chance of winning in men’s basketball, volleyball and boxing.

Key developments that could impact markets on Friday:

— CFTC commits to trader positioning data, which will show how many yen shorts have exited the market

— Final CPI Germany data

— ILO Unemployment Rate in France for the 2nd quarter

(by Stella Qiu; revised by Edmund Klamann)