Markets Rise as Hopes Grow for Eased China-US Trade Strains

SINGAPORE: Global equities soared on Friday as indications of potential trade discussions between the U.S. and China boosted risk appetite, following disappointing earnings from tech giants Apple and Amazon that raised concerns over the effects of a global trade conflict. On Friday, China's commerce ministry stated that the United States has frequently shown its readiness to discuss tariffs and that Beijing is open to negotiations, a step that may help reduce trade tensions affecting global markets. The remarks assisted U.S. stock futures in bouncing back from earlier declines after Apple reduced its share buyback plan and cautioned that tariffs might increase costs by roughly $900 million this quarter. Futures for the S&P 500 increased by 0.8 per cent, while Nasdaq futures climbed by 0.6 per cent. European stock markets were poised for a robust opening as Eurostoxx 50 futures rose by 1.3 per cent. MSCI's widest index of Asia-Pacific stocks excluding Japan climbed to its peak since March 25, recovering all losses incurred since U.S. President Donald Trump initiated a trade war with tariffs in early April.

Japan's Nikkei rose more than 1 per cent while Taiwanese stocks jumped 2.4 per cent. Hong Kong's Hang Seng jumped 1.6 per cent, whereas the mainland Chinese markets were shut down for an extended holiday. According to Matt Simpson, senior market analyst at City Index, "They (China) have adopted a careful approach, insisting that the U.S. demonstrate sincerity if they seek trade discussions." "Thus, although an olive branch has been extended, it's difficult to claim that China has 'come crawling' as Trump anticipated." Nonetheless, investor sentiment improved following the remarks as markets keep dealing with President Donald Trump's unpredictable tariff strategies that have ignited concerns of a sudden global economic decline. This week's data revealed that the U.S. economy contracted for the first time in three years during the first quarter, while China's factory output decreased at the quickest rate in 16 months in April as new tariffs began to take effect.

Global equities rise on trade optimism

Joseph Capurso, who leads international and sustainable economics at the Commonwealth Bank of Australia, stated that the primary effect of tariffs on the economy will be experienced when prices for consumers increase. A recession is probable if rising prices lead consumers to reduce spending and companies to downsize their workforces and slash capital expenditures. "Although recession is not our main scenario, it will be a tight situation this year." The earnings season to date has highlighted the impact of the swiftly changing U.S. trade policy, leading numerous companies to cut or retract their profit projections. Nevertheless, although investors were disappointed by the earnings reports from Apple and Amazon, robust performances from Microsoft and Meta Platforms earlier in the week had increased optimism that the tech sector might endure the tariff challenges. In currency markets, the Japanese yen dropped to its weakest point since April 10 during early Asian trading but was slightly stronger later at 145.26 per U.S. dollar.

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On Thursday, the Bank of Japan significantly downgraded its growth projections because of U.S. tariffs and maintained interest rates, indicating that the central bank might maintain its current policy for an extended period. Fred Neumann, HSBC's chief economist for Asia, noted that the uncertainty surrounding tariffs could indirectly create challenges for growth in Japan's economy. "The BOJ is leaving the possibility of additional rate hikes available, but currently, the door is only partially open." This positioned the U.S. dollar for a 0.4 per cent increase for the week leading up to the important non-farm payrolls data later today. The dollar index, which evaluates the U.S. currency relative to six other currencies, was recently a bit down at 100.02. According to a Reuters poll of economists, nonfarm payrolls probably grew by 130,000 jobs last month after a rise of 228,000 in March.

On Friday, Japanese Finance Minister Katsunobu Kato stated that the nation's substantial holdings of over $1 trillion in U.S. Treasuries are one of the resources Tokyo can leverage in trade discussions with the United States. The comment was made as Japan's leading trade negotiator, Ryosei Akazawa, met with U.S. Treasury Secretary Scott Bessent in Washington for another round of bilateral tariff discussions. In commodities, gold prices increased to $3,252.11 per ounce on Friday, yet were headed for their poorest weekly performance since late February. Oil prices surged following Trump's threat of secondary sanctions on Iran and indications of reduced trade tensions, which would help boost demand if they materialise. Brent crude futures increased by 0.66 per cent, whereas U.S. West Texas Intermediate crude futures climbed by 0.7 per cent.