Asian stock markets declined on Friday, following losses in U.S. equities, as investor anxiety grew over impending reciprocal tariffs and a potential escalation of the ongoing trade war. This overshadowed positive economic data revealing that the U.S. economy expanded at a faster pace than previously estimated.
A regional equity gauge dropped 0.8%, with key indices in Japan and South Korea retreating after the S&P 500 and Nasdaq 100 posted losses. U.S. equity futures also edged lower in early Asian trading. Meanwhile, gold prices advanced, reaching a new record high as investors sought safe-haven assets, while yields on 10-year U.S. Treasury bonds declined slightly.
Markets Await Tariff Announcement and Inflation Data
Investors exercised caution ahead of President Donald Trump’s scheduled April 2 announcement of reciprocal tariffs, following his recent imposition of levies on all automobile imports. Market participants also awaited the release of the U.S. Personal Consumption Expenditures (PCE) Price Index, a key inflation indicator, later on Friday.
“Stocks remain under pressure as markets digest the latest tariff measures while awaiting next week’s announcement and tonight’s PCE data,” said Kyle Rodda, senior market analyst at Capital. “The inflation data carries greater significance due to the Trump administration’s evolving trade policy.”
Trump has promoted the April 2 tariff announcement as a “Liberation Day,” intensifying the trade dispute by imposing a 25% tariff on all foreign-made vehicles. While he stated that the upcoming reciprocal duties would be “very lenient,” the markets remained uneasy about potential economic repercussions.
Investors Shift Focus to Inflation and Bond Yields
With the S&P 500 poised for its worst quarter since 2023, investors are closely monitoring the U.S. PCE data. The Federal Reserve’s preferred inflation gauge is expected to indicate persistent price pressures, a key concern for policymakers.
“Investors will be looking for inflation data that aligns with or exceeds expectations, along with strong employment figures, to gain confidence in economic stability,” noted Bret Kenwell of eToro.
The bond market reflected growing uncertainty, with the yield on the 30-year U.S. Treasury widening its spread over the five-year yield to its largest gap since early 2022. This shift signaled expectations of potential Federal Reserve interest rate cuts if economic growth slows.
Long-term Treasury yields reached their highest levels in a month on Thursday as investors demanded higher returns to offset risks associated with rising tariffs and potential inflation. Boston Federal Reserve President Susan Collins acknowledged that tariffs could drive near-term price pressures, though the long-term impact remains uncertain.
Global Market Reactions
In Japan, inflation in Tokyo accelerated, reinforcing expectations that the Bank of Japan will proceed with gradual interest rate hikes. The yen temporarily strengthened against the U.S. dollar, reaching 150.77 per dollar before retracing some gains.
Meanwhile, in China, a senior government official issued a veiled criticism of the U.S., calling for enhanced global cooperation. In response to external trade challenges, Chinese policymakers have prioritized stimulating domestic demand to sustain economic growth.
“Regardless of external pressures, China will continue to open its economy to the world,” stated Ding Xuexiang, a high-ranking Communist Party official, during a keynote speech at the Boao Forum.
Australia’s stock market rebounded from early losses, with the S&P/ASX 200 index posting gains. Investors are also gearing up for the country’s national election on May 3, with economic concerns such as cost-of-living pressures and the housing crisis dominating the political landscape.
Commodities and Cryptocurrency Market Trends
Oil prices remained on track for a third consecutive weekly gain as markets braced for further trade measures from the Trump administration. Meanwhile, gold rose 0.2% on Friday, reaching an all-time high above $3,061 per ounce. Several major banks, including Goldman Sachs, have revised their gold price forecasts upwards, with Goldman now projecting a year-end target of $3,300 per ounce.
In the cryptocurrency market, Bitcoin dipped 0.1% to $87,186.43, while Ether declined 0.3% to $2,000.4.
Key Market Movements:
Stocks:
- S&P 500 futures remained stable as of 9:47 a.m. Tokyo time
- Hang Seng futures gained 0.7%
- Japan’s Topix index fell 1.8%
- Australia’s S&P/ASX 200 index rose 0.3%
- Euro Stoxx 50 futures remained unchanged
Currencies:
- Bloomberg Dollar Spot Index held steady
- Euro traded at $1.0791
- Japanese yen remained at 151.14 per dollar
- Offshore yuan stood at 7.2706 per dollar
Bonds:
- 10-year U.S. Treasury yield declined by one basis point to 4.35%
- Australia’s 10-year yield fell three basis points to 4.48%
Commodities:
- West Texas Intermediate crude remained steady
- Spot gold increased 0.2% to $3,062.23 per ounce
As markets brace for further developments, investors continue to assess the impact of U.S. trade policies and inflationary pressures on global economic stability.
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