According to Bloomberg, Asian equity markets experienced a shift as chip companies began to recover from the initial impact of potential new US restrictions on sales to China. This change coincided with US initial jobless claims data showing the largest increase since early May, indicating a cooling labor market and raising expectations that the Federal Reserve might soon cut interest rates.

In Asia, investors are closely monitoring the outcomes of China's Third Plenum meeting. Key economic data set for release in the region includes June inflation figures for Japan, second-quarter gross domestic product for Malaysia, and the balance of payments for the Philippines.

In the US, the Russell 2000 index surged over 10% within a few days, largely driven by cooler inflation data released on Thursday, which bolstered hopes for rate cuts. This marked the best performance of small-cap stocks over their larger counterparts in a five-day period since 1978, as noted by Jim Bianco, founder of Bianco Research, in a recent social media post.

Despite the optimism, some analysts remain cautious. Wantrobski warned of potential bull traps, noting that the current rotation is in its early stages and cannot yet be confirmed as a long-term investment trend. Lori Calvasina of RBC Capital Markets highlighted that there have been several false starts, even though valuations and positioning suggest a possible shift to new market leadership. She emphasized that the upcoming earnings season will be a critical test for the rotation trade.

UBS US equity strategists, including David Lefkowitz and Nadia Lovell, expressed a positive outlook for US equities, citing broadening earnings growth. They have increased their year-end S&P 500 price target to 5,900, reflecting a constructive market backdrop.

In commodities, oil prices edged lower in early Friday trading, while gold remained relatively unchanged.