The global equity rally took a breather on Friday, with major indexes slipping from record territory as investors positioned for the U.S. PCE inflation release. After August’s tech-heavy surge, the collective message across desks was caution: trim exposure, avoid fresh risk, and let the final macro print of the month determine whether the “cut in September” story keeps running or needs a rewrite.
Europe set the tone early. Benchmarks retreated as traders parsed a softer-than-expected French inflation update against lingering political noise in Paris and awaited the euro-area’s own readings later in the session. Financials lagged after a renewed debate in the U.K. over bank interest earnings on central-bank reserves, a reminder that regulatory and policy discussions can still bite earnings even as net interest margins normalize. With the broad regional gauge flirting with its first weekly loss in weeks, the path of least resistance was to de-risk ahead of the U.S. data.
Asia’s overnight picture was mixed rather than gloomy. Pockets of strength in Chinese equities and select chip names were offset by pullbacks in Japan and South Korea, where investors marked down recent winners and tightened stops after a volatile stretch for the semiconductor complex. The result was a modest net drag on regional indices that echoed the global vibe: no panic, just a collective step back from the edge.
The cross-asset backdrop leaned “pre-event.” The dollar ticked higher into the release after spending much of August tracing a weaker path, reflecting growing conviction that the Fed can start easing policy as early as next month. The euro and the pound dipped but remained within their recent ranges, and rate-sensitive precious metals held firm on a monthly basis. Gold, in particular, was still on pace for an August gain despite a small pullback, aided by a softer dollar over the month and ebbing real yields. Crude oil eased, with demand concerns nudging prices lower following a run-up earlier in the week.
All eyes now turn to the composition of the PCE report. If the core measure lands in line with forecasts, markets are likely to stick with a “cut soon, go slow later” playbook: one move in September, then a data-dependent cadence into year-end as officials gauge how quickly services inflation and wage growth cool. A hotter surprise would shift the calculus—front-end yields would likely pop, the dollar could stabilize further, and high-multiple growth leadership might face sharper profit-taking. After a month of momentum and record closes, Friday’s message was simple: it’s the inflation table, not the earnings scoreboard, that will decide how August ends and September begins.
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