Stocks rise on trade talks, Fed rate-cut hopes
Shares in South Korea rose 0.8 per cent as Treasury Secretary Scott Bessent said the US may reach an "agreement of understanding' on trade as soon as next week. The Nikkei-225 rose as much as 1.8 per cent as the yen declined on positive comments from the US-Japan trade talks. A gauge of the dollar edged up while Treasuries held gains from Thursday (April 24).
Google parent Alphabet Inc. rose 4.8 per cent on strong earnings, sending futures contracts for the S&P 500 and the Nasdaq 100 up 0.3 per cent. Technology shares advanced, led by gains in Taiwan Semiconductor Manufacturing Co.
Appetite for risk is returning as the White House strikes a conciliatory tone, boosting investor optimism the US will clinch crucial trade deals with top economic partners. In a sign that markets may be stabilising after the jolt from Donald Trump's century-high levies, a gauge of Asian stocks on Friday erased all its losses since April 2 - the day the US president announced his reciprocal tariffs.
"Investors are feeling a little more chipper in Asia, taking their cue from the recovery in US markets,' said Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong. "At the end of the week, there are hopes that trade tensions may begin to thaw at the edges, with prospects for deals improving.'
Trump said his administration was talking with China on trade, while Beijing denied the existence of negotiations and demanded the US revoke all unilateral tariffs. Dozens of nations have appealed to Washington for relief from higher tariffs that have been suspended for 90 days to provide time for talks.
"They had a meeting this morning,' Trump said Thursday about China. "It doesn't matter who 'they' is. We may reveal it later, but they had meetings this morning, and we've been meeting with China.'
The US-South Korea discussions were "very successful,' according to Bessent. That follows the US making "significant progress' toward a bilateral trade deal with India.
Japanese Finance Minister Katsunobu Kato said specific currency levels or targets didn't come up in his talks Thursday with Bessent, and the two sides agreed that foreign-exchange rates should be determined by the market. The yen fell to trade near 143 against the dollar.
"We are into the first or second act of a theatre of negotiation between the United States and their various trading partners,' said John Woods, Asia chief investment officer at Lombard Odier Hong Kong Ltd. "And my sense is once we get to close to that third act, maybe in the next couple of quarters or so, clarity towards the likely implications of the tariff story will become a lot clearer.'
Still, uncertainty over the Trump administration's trade policy is making it difficult for the corporate world to forecast how the year will play out. Several analysts are souring on the profit outlook due to the risk of an economic slowdown, with the US benchmark's earnings revisions breadth - or estimated upgrades versus downgrades - approaching downside extremes.
American Airlines Group Inc. withdrew its full-year earnings outlook, joining a growing number of companies hedging their bets on the broader economy. Southwest Airlines Co.'s chief said his industry is already in a recession. PepsiCo Inc. and Procter & Gamble Co. lowered their forecasts.
Also lifting the mood of the market Friday was comments from two Fed officials about cutting interest rates.
Fed Governor Christopher Waller said he'd support rate cuts in the event aggressive tariff levels hurt the jobs market, speaking in an interview on Bloomberg Television. Cleveland Fed President Beth Hammack told CNBC the central bank could move on rates as early as June if it has clear evidence of the economy's direction.
One key thing to watch is the yield on the ten-year US Treasury, said Kelvin Tay, a regional CIO at UBS Global Wealth Management. It's key for the Trump administration to keep the yields to 4.5 per cent and below as anything above that level is when markets will react negatively, he said. The yield on the ten-year bond was little changed at 4.31 per cent on Friday.
"The combination of the dollar weakening, treasury yields going up and equity markets coming off will likely force the hand of the US administration,' he said. - Bloomberg
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