Asian Markets End Strong Week Slightly Lower as Bonds Rebound

SYDNEY: Asian stocks looked poised to conclude a robust week on a quieter note on Friday as the excitement regarding U.S.-China trade negotiations diminished, while stronger expectations for policy easing in the United States triggered a surge in struggling bond markets. Oil prices stabilised after dropping more than 2 per cent overnight due to reports of a potential U.S.-Iran nuclear agreement, yet they remain up 1 per cent for the week as the global economic outlook improved. European stocks are preparing for a similarly quiet start, with minimal data or events planned later in the day to act as a significant catalyst. EUROSTOXX 50 futures remained largely unchanged, and Wall Street futures similarly showed minimal variation. 

Global share markets have had an excellent week as investors welcomed the trade war ceasefire between the United States and China, significantly reducing the likelihood of a worldwide recession. Nonetheless, sufficient ongoing uncertainty remained to maintain investor caution as the weekend approached. On Friday, traders resumed selling the dollar, leading to a 0.3 per cent decline against the Japanese yen and a 0.2 per cent drop against the Swiss franc. The Australian dollar increased by 0.4 per cent, and the kiwi was up 0.5 per cent. "The markets face a weekend with reduced risks of holding open positions compared to last week, as there are no major trade discussions or notable risks scheduled," stated Kyle Rodda, a senior analyst at Capital.com.

"Nonetheless, there tends to be a subtle risk-off sentiment approaching the weekend during a Trump administration, with an unpleasant downside shock at the Monday opening just a single social media post away." The MSCI's most comprehensive index of Asia-Pacific stocks outside Japan remained unchanged at 613.7 on Friday, yet it is still poised for a weekly increase exceeding 3 per cent. Goldman Sachs increased its 12-month target for the Asian index to 660, up from the previous 620. Hong Kong's Hang Seng index decreased by 0.6 per cent, pulled down by a nearly 5 per cent drop in tech leader Alibaba following its disappointing quarterly revenue report. Their shares listed in the U.S. had already dropped 7.6 per cent overnight.

ALSO READ: Jewellery Drives Richemont’s 7% Rise in Sales

Japan's Nikkei reduced its earlier losses and was last unchanged after data revealed its economy contracted for the first time in a year during the March quarter, highlighting the delicate state of its recovery now at risk from U.S. trade policies. Cautioning about the economic risks posed by U.S. tariffs, Bank of Japan board member Toyoaki Nakamura stated that the central bank should refrain from increasing interest rates for now. Swaps indicate limited chances of a shift until later in the year, assigning a 50:50 probability to a quarter-point increase in October. On Wall Street, U.S. core retail sales were weak and producer prices dropped unexpectedly in April, as markets increased their bets for a total easing of 56 basis points from the Federal Reserve this year, up from 49 bps previously. That assisted Treasuries in recovering after a challenging week. On Friday, the benchmark ten-year yields decreased by 3 basis points to 4.422 per cent, after previously declining by 7 bps overnight, distancing itself from its one-month peak.

For the week, they remain up 8 bps. The two-year yields decreased by 3 bps to 3.945 per cent, having dropped 8 bps overnight. On Thursday, Fed Chair Jerome Powell stated that policymakers believed it was necessary to reassess the fundamental aspects regarding jobs and inflation in their existing monetary policy strategy. Up to now, U.S. price information has appeared mild, yet it could only be a matter of time before the effects of tariffs begin to manifest in the actual data. Walmart, the biggest retailer globally, announced that it would need to begin increasing prices later this month because of the elevated cost of tariffs. In the commodities markets, oil prices remained stable. U.S. crude futures increased by 0.1 per cent to $61.71 a barrel, while Brent rose to $64.61 per barrel, also up 0.1 per cent for the day. In precious metals, gold prices declined by 0.7 per cent to $3,217 per ounce, following a 2 per cent increase overnight. During the week, they have decreased by 3.2 per cent.