Asian Stocks Rise on Trade-Deal Hope, Fed Cut Bets: Markets Wrap

(Bloomberg) -- Asian stocks advanced and a gauge of global equities was on track for another record high on trade-deal optimism and increased expectations for Federal Reserve interest-rate cuts this year.

Asia-Pacific stocks gained as much as 0.7% to the highest since September 2021 after the S&P 500 advanced 0.8% to within striking distance of a record. The Nasdaq 100 achieved the feat on Thursday, helping MSCI’s global shares index to a new high. US stock futures edged upward Friday and Japanese stocks rose, while South Korea’s fell.

US Commerce Secretary Howard Lutnick said late Thursday that the US and China had finalized an understanding on trade following talks last month. Meanwhile, the Treasury Department announced a deal with G-7 allies that will exclude US companies from some taxes imposed by other countries in exchange for removing the “revenge tax” proposal from President Donald Trump’s tax bill.

There’s “a long list of positive headlines” out right now, said Chetan Seth, Asia Pacific equity strategist at Nomura. “Softening US yields amid rising Fed rate cut expectations,” and the US tax and trade developments, plus “in the background, the artificial-intelligence theme has regained momentum. So stocks appear to be climbing the proverbial wall of worry.”

Treasuries slipped after rallying Thursday on increased expectations for Fed cuts. The swaps market has fully priced two further rate reductions this year and increased bets on a third. An index of the dollar was little changed after dropping for four straight sessions. 

The Thursday moves were driven by US economic data that supported the case for policy easing. Consumer spending grew in the first quarter at the weakest pace since the onset of the pandemic. As a result, gross domestic product slid at a downwardly revised 0.5% annualized rate. Recurring applications for unemployment benefits rose to the highest since 2021 — but initial claims fell.

A flurry of Fed officials this week made clear they’ll need a few more months to gain confidence that tariff-driven price hikes won’t raise inflation in a persistent way. Economists see the personal consumption expenditures price index excluding food and energy — the Fed’s preferred gauge of underlying inflation — marking the tamest three-month stretch since the pandemic five years ago.

“The market seems to be riding high on hopes inflation is cooling and the Fed can start cutting soon, and a soft PCE print could seal that story,” said Haris Khurshid, chief investment officer at Karobaar Capital. “But if growth doesn’t pick up or earnings disappoint, this rally could run out of steam fast.”

In Asia Friday, the yen fluctuated after inflation in Tokyo slowed for the first time in four months. China’s industrial firms saw their profits drop sharply in May, illustrating weakness in an economy strained by higher US tariffs and lingering deflationary pressure. Markets are closed in Indonesia and Malaysia.

Copper stocks rose as Goldman Sachs Group Inc. analysts warned that shortages will get worse before levies come into effect. A key one-day copper price spread surged to the highest level in four years on the London Metal Exchange, placing fresh strains on buyers contending with a rapid decline in inventories fueled by US plans to impose tariffs on the metal.

Stock-market volatility is likely to remain higher in the second half of the year given lingering macro and policy uncertainty, according to separate Goldman strategists. The team led by Andrea Ferrario says stagflationary shocks remain a key risk for balanced portfolios amid tariff-induced inflation risks.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:14 p.m. Tokyo time
• Japan’s Topix rose 1.3%
• Australia’s S&P/ASX 200 fell 0.2%
• Hong Kong’s Hang Seng was little changed
• The Shanghai Composite fell 0.2%
• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1696
• The Japanese yen was little changed at 144.44 per dollar
• The offshore yuan was little changed at 7.1689 per dollar

Cryptocurrencies

• Bitcoin fell 0.3% to $107,477.47
• Ether was little changed at $2,446.07

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.26%
• Japan’s 10-year yield advanced 1.5 basis points to 1.425%
• Australia’s 10-year yield advanced three basis points to 4.14%

Commodities

• West Texas Intermediate crude rose 0.6% to $65.61 a barrel
• Spot gold fell 1% to $3,293.97 an ounce

This story was produced with the assistance of Bloomberg Automation.

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