Trade-driven rally ends the week with a whimper

A look at the day ahead in European and global markets from Stella QiuThe week started with a bang but by Friday the risk-on rally - supercharged by a China-U.S. trade truce - was wearing thin as traders grew wary that the rebound had overshot and that more twists and turns lie ahead in the trade saga.Wall Street and European stock futures are little changed while Asian shares are mixed. Hong Kong's Hang Seng index .HSI fell 0.8%, weighed down by Alibaba's 9988.HK more than 5% tumble after its earnings failed to impress investors. Australian shares fared better, rising 0.7%.The stock market now seems to be acting as if the tariff war never happened. The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS is hovering just below a seven-month top. Even Chinese blue chips .CSI300 have recovered all of the losses since April 2 when President Donald Trump announced "reciprocal" tariffs - since put on hold - on the rest of the world.Beaten-down bond markets cheered an unexpected fall in U.S. producer prices and a soft core retail sales print, prompting investors to nudge up their rate cut outlook for the Fed, pricing in a total of 56 basis points in rate cuts for this year, up from 49 bps.Ten-year benchmark Treasury yields US10YT=TWEB fell 3 basis points to 4.424% on Friday, extending a 7 bps decline overnight.Trump has meanwhile been busy in the past few days talking up deals in the Middle East, including a potential nuclear deal with Iran. Trump's comments that a deal was near sent oil prices tumbling 2% on Thursday.The broader markets are keen, however, for progress in trade talks with China and details of more trade deals with other countries after an agreement with Britain.Let's not forget tariffs are still a lot higher than before Trump began his crusade on trade, and the highest since the 1930s.Walmart WMT.N, the world's largest retailer, said it would have to start raising prices later this month due to the high cost of tariffs, pointing to more pain ahead for U.S. consumers.Although the latest U.S. price data looked benign, it might be just a matter of time before the impact of tariffs starts to show up in the hard numbers that the Federal Reserve has said it needs to see before considering its response to trade-related uncertainties.The economic calendars in Europe and the U.S. are a bit thin. U.S. releases on Friday include import prices for April and the University of Michigan consumer sentiment survey, which might be useful for gauging the impact of Trump's tariff manoeuvring.Key developments that could influence markets on Friday:- University of Michigan consumer sentiment survey- U.S. import prices for April