Asian stock markets are on track for a second consecutive week of gains, while the U.S. dollar is set to record its first weekly rise in over a month. Investors are reacting positively to signs of a shift in the U.S. administration’s stance on China, despite the absence of clear signals of a full de-escalation in trade tensions.
Alphabet, the parent company of Google, exceeded profit expectations and reaffirmed its commitment to AI investments, sending its shares up nearly 5% in after-hours trading. This surge helped lift other tech stocks and S&P 500 futures, which rose by 0.5%.
Wall Street also saw a solid rally overnight, with the S&P 500 gaining 2% despite mixed corporate results. The dollar, which had been under pressure in recent weeks due to a series of tariff announcements and reversals, appears to be stabilizing, trading at approximately $1.1350 against the euro and 143 yen. Dollar selling in Asia seemed to ease on Friday.
Market sentiment appears to reflect a renewed confidence in U.S. assets, with ING currency strategist Francesco Pesole noting that investors may feel they have regained some leverage over U.S. policy, particularly on trade issues. “Investors will be looking for confirmation of a more optimistic outlook on U.S. assets to justify further dollar gains,” he added.
This shift in sentiment follows a change in tone from the U.S. government, which acknowledged this week that the ongoing tariff war with China is unsustainable. However, China has denied engaging in trade talks with Washington, despite statements from U.S. President Donald Trump suggesting otherwise. Beijing has also warned other nations against entering agreements with the U.S. that would come at China’s expense.
Christopher Wood, global head of equity strategy at Jefferies, believes the recent equity market rebound is a direct result of Trump’s apparent reversal on China tariffs. “The U.S. does not hold the upper hand in this particular situation,” he said.
In Japan, the Nikkei index rose 1.4% on Friday, recovering all losses incurred since Trump’s April 2 announcement of sweeping U.S. tariffs. The technology sector led the rally, with electric motor maker Nidec’s stock surging 11% after forecasting a record annual profit. Nissan’s shares rose 2% as investors speculated that the worst might be over, following the automaker’s projection of a record net loss.
In Hong Kong, the Hang Seng Index gained 0.9%, while China’s mainland indices, the Shanghai Composite and the CSI 300, posted modest gains. The U.S. dollar index was up 0.4% for the week, standing at 99.619.
However, despite the positive momentum, analysts caution that markets may not remain calm for long. Gold prices have held steady at $3,349 per ounce, and the Gold/S&P 500 ratio, a gauge of investor pessimism, has reached its highest level since the pandemic-induced market downturn of 2020.
Additionally, U.S. companies such as Procter & Gamble, PepsiCo, Chipotle Mexican Grill, and American Airlines have revised or withdrawn their forecasts due to heightened uncertainty among consumers. Pressure on the U.S. Treasury market also remains, with the 10-year yield standing at 4.3168% on Friday, reflecting ongoing concerns about U.S. leadership and the economic outlook.
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