Semiconductor and technology stocks declined for the second day in a row amid the prospect of worsening trade ties between the U.S. and China. The European Central Bank held its key lending rates steady, citing elevated inflation pressures. China's policymakers concluded their much-delayed Third Plenum with no major announcement.
U.S. major averages extended their rally to the seventh consecutive week as the earnings season gathered momentum. European markets halted a three-day rally amid earnings weakness and a China-led slowdown. Chinese stocks were under pressure after weak second-quarter GDP growth and retail sales highlighted weakening consumer demand.
Investors adjusted their positions in the hopes that the latest easing of inflation would spur the Federal Reserve to lower the interest rate sooner than expected. Rate-cut expectations boosted the small-cap indexes, which soared as investors sold mega-cap tech stocks. The yen jumped 2% following rising expectations of a U.S. rate cut.
Benchmark indexes on Wall Street advanced to new highs, but indexes in Europe extended losses amid growing political uncertainties. Japan indexes closed at new highs, tracking gains in New York; China indexes turned lower ahead of inflation and trade balance reports; and India indexes touched new record highs.