ASIAN shares posted a modest gain Friday after a rebound in Treasuries and the dollar eased some concerns about US fiscal policy.
A regional stock gauge advanced 0.4% on gains in Japan, Australia and South Korea. US equity-index futures fluctuated in early Asian trading after the S&P 500 ended fractionally lower for its third daily decline. Treasuries steadied after rallying across the curve Thursday on moderating US fiscal concerns. The 30-year yield was little changed at 5.04%. An index of the dollar was steady Friday after rising 0.2% in the prior session.
Bond markets this week have reflected investors’ concerns about the fiscal health of the US economy, which was amplified after Moody’s Ratings downgraded the nation’s top credit rating May last week. That broke a relative calm in financial markets after a month of turmoil from US President Donald Trump’s tariff blitz announced on April 2. US stocks had even rallied to within striking distance of a bull market.
“The bond market is speaking, equity markets aren’t really listening at this point,” Thomas Taw, head of Asia Pacific investment strategy at BlackRock Asset Management, said in a Bloomberg Television interview. “All these measures that are coming through, whether it’s tax bill, tariffs, et cetera, these are all inflationary type of measures.
Thursday’s rebound in Treasuries came after the bond market sold off recently to reflect worries about the US’ surging debt load. Investors are concerned that Trump’s signature tax bill, which narrowly passed the House, would boost the nation’s already swelling deficit.
With the yield on 30-year Treasury bonds again passing the 5% mark on Wednesday, the nation’s creditors injected a dose of harsh economic reality into Trump’s fiscal policy.
“It’s been another big week for the Treasury market,” JPMorgan Chase & Co. strategists Jay Barry, Jason Hunter and Phoebe White wrote in a note Thursday. “While the proximate cause may have been Moody’s downgrade of the US last Friday evening, we have argued that this action was a fait accompli.”
Thursday’s Treasuries rally was broadly supported by economic readings. US business activity and output expectations improved as trade-related anxiety eased even as price pressures continued to mount. In a sign of a still healthy labor market, initial jobless claims dropped to the lowest in four weeks. Elsewhere, existing home sales unexpectedly fell.
In Japan, the key inflation gauge accelerated at the fastest clip in two years, fueled by rising food and energy costs. Consumer prices excluding fresh food rose 3.5% from a year earlier in April, quickening from a 3.2% gain in the previous month. The yen was slightly stronger.
Markets Live Strategist Mark Cranfield says:
JGB futures look set for a soft Friday after Japan’s CPI came in above estimates, with core numbers climbing to 3.5%. It looks as though JGBs won’t be getting any of the positive read across from higher Treasuries.
Meanwhile, Federal Reserve Governor Christopher Waller said the central bank could cut interest rates in the second half of 2025 if the Trump administration’s tariffs on US trading partners settle around 10%.
“If we can get the tariffs down closer to 10% and then that’s all sealed, done and delivered somewhere by July, then we’re in good shape for the second half of the year,” Waller said Thursday during an appearance on Fox Business.
Separately, the US Supreme Court shielded the Fed from Trump’s push to oust top officials at independent federal agencies, in a decision likely to quell concerns that the president might move to fire Jerome Powell.
In commodities, gold edged up 0.2% after a drop in the prior session. Brent crude edged down for a fifth consecutive day. –BLOOMBERG
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