MARKET WRAPS
Stocks:
European shares rose, boosted by a rally in AI-linked stocks while oil dropped Friday as investors battled continued uncertainty surrounding the war in the Middle East.
Markets were reassessing the risk of supply disruptions in the region as well as the likelihood that U.S.-Iran diplomatic efforts could reopen the Strait of Hormuz.
Eurozone government bond yields began the day lower after Treasury yields stabilized.
Following central banks' responses to the prolonged period of high energy prices, the question now is whether much more policy tightening is actually needed.
"Yields are already high enough to bite into mortgages, corporate borrowing, and investment," KBRA said.
Economic Insight
In Germany, consumer confidence dropped on rising energy prices as tensions escalated in the Middle East. In the U.K., consumer confidence improved.
Meanwhile, lending to eurozone businesses halved in August, a sign that rising borrowing costs are hindering investment, following the European Central Bank's decision to raise its key interest rate.
U.S. Markets:
Stock futures were up with both the Dow and the Nasdaq tracking higher.
The economy keeps powering through inflation, tariffs and higher borrowing costs, defying a run-up in Treasury yields and a Fed rate increase, which is spooking the bond market.
Forex:
The dollar eased slightly but remained close to an eight-week high, supported by expectations for further U.S. interest-rate increases.
The Swiss franc could fall further after the Swiss National Bank failed to push back against a weaker currency, MUFG Bank said.
Bitcoin edged lower.
Bonds:
Eurozone government bond yields fell as Treasury yields stabilized after a light selloff in Asia.
Societe Generale said the U.S.-Iran conflict, as well as energy price developments remain the key uncertainty for eurozone government bond yields.
The 10-year Treasury yield was being pushed higher by a confluence of factors, according to Madison Investments.
Catalyst Funds said the continued rise in longer-term Treasury yields is hardly surprising.
Yields on U.K. government bonds fell.
Energy:
Oil prices ticked lower as traders weighed signs of diplomatic progress to end the Middle East war.
Metals:
Gold prices were headed for a weekly loss.
EMEA HEADLINES
Novo Nordisk to Pay Up to $1.3 Billion for Nanexa's Drug Delivery Technology
Novo Nordisk agreed to pay up to $1.3 billion to license and develop Swedish pharmaceutical company Nanexa's drug delivery technology in a deal that could cut the frequency that patients need to inject its obesity and diabetes drugs.
The deal covers Nanexa's PharmaShell technology, which is designed to enable controlled and sustained release of active pharmaceutical ingredients through an ultra-thin coating applied to individual drug particles.
ArcelorMittal Says It Can't Restart Ukrainian Operations After Missile Strikes
ArcelorMittal said it isn't able to safely restart operations at its Ukrainian subsidiary after missile attacks killed five people and injured 17 employees.
The Luxembourg-based steelmaker said Friday that four missile strikes at ArcelorMittal Kryvyi Rih over the past five weeks also caused extensive damage to production facilities. The most recent attack was on Monday.
Why the Gulf Wants Trump to Hold the Line on Iran
DUBAI-Efforts to rekindle talks to end the war between the U.S. and Iran are running into resistance from major Persian Gulf oil producers that have swung against any accommodation of Tehran, people familiar with the matter said.
Mediators including Qatar are pressing for a fresh round of talks in Oman as soon as next week to try to get Washington and Tehran to reopen the Strait of Hormuz and start the process of winding down the war. President Trump said Tuesday he believed the two sides would meet again soon.
GLOBAL NEWS
Five Takeaways From Trump's Washington Summit With Xi
WASHINGTON-President Trump hosted Chinese leader Xi Jinping for a summit heavy on ceremony and light on outcomes, concealing major disagreements between the two superpower nations on trade, technology and Beijing's support for Iran.
A modest two-month extension on an existing trade detente was reached, and the leaders discussed artificial intelligence threats. Xi warned about a broader "zero sum gladiatorial contest." And once again he pressed Trump on Taiwan, the democratic, self-governing island that China claims as part of its territory, saying the U.S. should oppose independence.
'The EU Is Not Waiting for the AI Car to Crash'
U.S. tech boosters love to ridicule our Continental cousins' pearl clutching on AI. But they may have some ideas worth studying.
As Washington and Silicon Valley scramble to rein in artificial intelligence, allies across the Atlantic are already having at it. Not a shock, to be sure. The European Union has typically raced ahead regulation-wise with the 2024 EU AI Act.
France to Deploy Forces to Protect Saudi Red Sea Oil Port
PARIS-President Emmanuel Macron said on Thursday that France plans to send troops to Saudi Arabia to help protect a refinery and crude oil pipeline in the Red Sea port of Yanbu, ramping up France's military efforts to contain the impact of the Iran war.
"We are going to send military assets, that is, soldiers, radar systems, and defense systems to protect this site," Macron said in a TV interview on Thursday. However, he stressed that France was "not getting involved in any conflict," adding that the decision had been finalized with Saudi authorities.
Senate Republicans Defeat Latest Push to End Iran War
WASHINGTON-With just weeks to go before midterm elections, Senate Republicans beat back a resolution to curb President Trump's ability to wage war against Iran, even as a growing number of GOP incumbents and candidates in tough races insist they want the war to end soon.
The measure was defeated in a 50-49 vote, largely along party lines. One Democrat, Pennsylvania Sen. John Fetterman, voted with most Republicans to oppose the resolution, which would have directed the president to remove U.S. troops from hostilities against Iran. Four Republicans-Sens. Thom Tillis of North Carolina, Susan Collins of Maine, Rand Paul of Kentucky and Lisa Murkowski of Alaska-voted with all other Democrats in favor of the measure.
Write to nina.kienle@wsj.com