European markets extended Thursday's sharp tech-led rebound, with the STOXX 50 futures up 1.7% and European equities following Wall Street's enthusiasm around the SpaceX IPO debut and semiconductor strength. The PHLX Semiconductor Index surged nearly 8% on Thursday, lifting the Nasdaq 2.5% and the S&P 500 1.75% to 7394.3, as investors bet that recent inflation upside won't force the Fed into aggressive tightening. The ECB's 25bp rate hike to 2.00% — its first since 2023 — was fully priced and failed to derail the rally, with President Lagarde's remarks offering no major surprises.

However, the risk-on tone faced headwinds from economic data disappointments and growth concerns. UK April GDP contracted 0.1% m/m, matching the downward forecast but marking a sharp reversal from March's +0.3% gain. Manufacturing and industrial production also underwhelmed, reinforcing worries about the UK economy's fragility and weighing on sterling. The World Bank's downgrade of global GDP growth to 2.5% added to the cautious undertone, particularly for commodity-sensitive assets. WTI crude dropped 4.37% to $83.88/barrel as easing Iran war escalation fears and demand concerns outweighed supply risks, while Brent fell around 2%.

In FX markets, the dollar traded mixed, supported by higher US 10-year yields (4.46%) and sticky inflation (May CPI at 3.8% y/y) but capped by the ECB's tightening and improved risk appetite. EUR/USD held a narrow range at 1.15508 after the ECB decision, while GBP/USD underperformed at 1.33852 on the weak UK data. USD/JPY remained elevated near 160.266, supported by the wide US-Japan rate differential and reduced safe-haven yen demand, though intervention risk from Japanese authorities looms. Crypto markets showed modest gains, with Bitcoin up 0.95% to $63,383 and Ethereum up 0.88% to $1,670.41, benefiting from the tech rally but remaining volatile amid macro uncertainty.

US pre-market futures are holding gains as the SpaceX IPO momentum carries into Friday, with investors awaiting the University of Michigan preliminary consumer sentiment survey (forecast: 46.1 vs 48.2 prior) at 14:00 ET for clues on the consumer outlook. Inflation expectations from the same survey will also be closely watched after May CPI's upside surprise. The light earnings calendar and absence of major Fed speakers today suggest price action will be driven by technical momentum, sentiment data, and any fresh geopolitical or policy headlines. Oil weakness and global growth worries continue to temper the equity rally's sustainability.

The key risk event for the US session is the University of Michigan preliminary consumer sentiment index at 14:00 ET, with consensus expecting a further decline to 46.1 from 48.2 in May. A worse-than-expected print could reignite recession fears and pressure equities, while a beat might support the narrative that the consumer remains resilient despite elevated inflation. The accompanying inflation expectations gauge is equally critical; any uptick from the prior 4.5% could reinforce Fed hawkishness and weigh on rate-sensitive growth stocks, while a decline would ease tightening concerns.

Beyond the data, the market's technical positioning after two days of strong gains raises the risk of profit-taking, particularly in semiconductors and mega-cap tech that led the rally. The SpaceX IPO excitement has driven speculative flows, but sustainability depends on follow-through buying and confirmation that earnings expectations can justify valuations in a higher-for-longer rate environment. Oil's 4%+ drop and the World Bank's growth downgrade have introduced a deflationary undertone that could shift sentiment if commodity weakness accelerates or spreads to industrial metals.

Geopolitical risk from the Iran conflict remains a wildcard, with any escalation capable of reversing oil's decline and triggering safe-haven flows into gold, the yen, and Treasuries. On the policy front, while no Fed speakers are scheduled, any unexpected commentary on the May CPI data or rate-path guidance could move markets. The light earnings calendar means macro themes will dominate, and traders should watch for end-of-week position adjustments ahead of the weekend, especially in crypto and leveraged equity positions. Finally, the ECB's tightening cycle and UK growth weakness have refocused attention on European recession risk, which could weigh on global cyclicals if data continues to disappoint.