European stocks rise, dollar set for weekly loss after yields drop

European equity markets rallied on Friday, buoyed by a stabilization after a steep tech-driven sell-off earlier in the week. Meanwhile, the US dollar appeared set to slip for the week amid lower Treasury yields and a shift in investor sentiment. The turmoil this week stemmed from apprehensions over rising interest rates and the debt-backed financing of the artificial intelligence boom, sparking a sell-off in tech and chip stocks.

Market participants grew more inclined towards further US rate hikes following robust inflation data released on Wednesday. Concurrently, investors shifted towards Treasuries and other government bonds. European equities rebounded and Asian stocks mostly rose on Friday, with bond markets showing steadiness and investors unwinding their previous movements.

MSCI's World Equity Index edged up 0.4 percent but was still on track for a weekly decline. Most European stock indexes exhibited greater resilience, with the STOXX 600 climbing 0.6 percent, Germany's DAX advancing around 1 percent, and France's CAC 40 rising by 0.5 percent. London's FTSE 100 saw a gain of less than 0.1 percent, while US stock futures hinted at a recovery on Wall Street, with S&P 500 futures up 0.2 percent.

Nasdaq futures, however, remained in the red as investors retained worries about mounting credit risks tied to the AI trade, particularly among heavily indebted data-center operators like CoreWeave, a factor that contributed to Thursday's sell-off. The sustainability of profits and margins in the sector remained a key uncertainty, according to Amelie Derambure, a senior multi-asset portfolio manager at Amundi in Paris.

Despite this, she maintained an overweight stance on US equities, anticipating earnings to be strong enough to curb any market correction. The dollar's decline, coupled with a gain in European bond yields, facilitated the euro's rebound from its 17-month low. European government bond yields nudged higher on Friday, with Germany's 10-year yield at 3.4355 percent, while G7 bond markets were poised for their strongest weekly performance since late May.