A late-week rally in global shares left them on track for weekly gains after earnings from some US tech giants eased concerns about AI returns, while the yen declined after the Bank of Japan kept interest rates unchanged on Friday.
South Korea's battered KOSPI leapt 17.91 percent, mounting a record comeback after heavy losses earlier this week. The tech-heavy bourse, still about 30 percent off its all-time high, has become emblematic of the sharp swings in investor sentiment towards artificial intelligence-related stocks.
Jittery investors concerned that the AI rally may soon run out of steam were reassured by Microsoft's earnings on Wednesday, where it forecast generating cash throughout fiscal 2027.
Amazon followed a day later with its strongest cloud growth in more than four years, satiating investors eager for signs that the billions being poured into AI buildout are bearing fruit.
"Investors are increasingly focused on capital efficiency, financing and the long-term economics of hyperscalers' AI spending rather than on near-term demand," said Saverio Papagno, portfolio manager of North Square Growth Opportunities ETF.
While worries about AI hyperscalers' debt reliance swirl, selloffs could be a buying opportunity for long-term investors as "the sector will resume its leadership" once there is greater clarity, he said.
Futures tracking the tech-heavy Nasdaq 100 index rose 0.83 percent, while S&P 500 and Dow futures rose 0.35 percent and 0.46 percent, respectively.
In Europe, the STOXX 600 index hit a record high and was poised for its fourth consecutive month of gains.
The MSCI All Country World Price index gained 0.87 percent and was on track to snap a two-week losing streak. It will still end the month with losses of 0.33 percent should current levels hold.
Yen resumes retreat
Investors are watching the yen, which resumed its decline versus the dollar a day after Tokyo's intervention brought some reprieve.
The dollar was up 0.56 percent at 160.38 yen, after a 2.42 percent slide on Thursday, when Japan conducted yen-buying, dollar-selling intervention, a market source said.
"I don't think intervention can or will be significantly potent in reversing the trend in yen weakness. It will have to come alongside the promise of more reinvestment in domestic assets and quicker pace of hiking from the BOJ," said Edward Acton, rates strategist at GMO.
The BOJ kept interest rates unchanged on Friday, but signaled its resolve to push up borrowing costs. At a press conference, Governor Kazuo Ueda said inflation risks were skewed to the upside, and the central bank was prepared to speed up the pace of rate hikes should monetary conditions be accommodative.
Conflict keeps markets on edge
The Middle East conflict remains a major overhang for global equities. Fresh strikes in the region have dashed hopes of an imminent resolution, and diplomatic efforts to end the conflict have proceeded in fits and starts.
Oil prices rose sharply in July, with Brent crude headed for monthly gains for the first time since March.
"The shock absorbers in oil markets are dwindling fast, so a failure to de-escalate would be materially costlier than previous rounds of tension," wrote Teddy Bunzel, head of Lazard Geopolitical Advisory at Lazard Asset Management.
The yield on the 30-year US Treasury slipped 2.32 basis points but held close to 19-year highs. Short-end yields eased, steepening the curve as doubts grow over the Federal Reserve's ability to anchor inflation expectations.
The Fed stood pat on rates earlier this week, but commentary from the chair confused markets.
