SYDNEY: Asian shares climbed on Thursday following U.S. President Donald Trump’s indication of a preliminary trade agreement in his international tariff conflict, while the dollar maintained most of its overnight gains as markets reduced the likelihood of imminent rate reductions. Nasdaq futures recovered from previous declines to climb 1.1 per cent, and S&P 500 futures increased by 0.8 per cent. European stock exchanges are anticipated to start higher, with the pan-European STOXX 600 index rising by 0.9 per cent. Trump stated he would reveal information regarding a significant trade agreement with an unnamed country during a press conference later today. The New York Times stated that the agreement was with Britain, causing FTSE futures to rise by 0.8 per cent.
The president's remarks emerged as investors nervously anticipate the scheduled trade discussions between Washington and Beijing on Saturday, potentially signalling the initial move towards resolving a harmful trade conflict between the two leading economies globally. Markets are also watching the Bank of England's policy meeting later today, where a quarter-point rate cut is anticipated. Moreover, the central banks of Sweden and Norway are scheduled to announce their policy decisions, but no alterations are anticipated. Overnight, as anticipated by many, the Federal Reserve maintained the policy rate within the 4.25%-4.5% range, yet indicated that the risks of increased inflation and unemployment had grown. Chair Jerome Powell stated that it's uncertain whether the economy will maintain its consistent growth rate or suffer due to increasing uncertainty and a potential rise in inflation.
Markets reduced the likelihood of a June rate cut to only 20 per cent, down from 30 per cent the previous day, while a July adjustment is now estimated at 70 per cent, in contrast to a near-guarantee just a week prior. "This indicates a limited willingness to act until they are assured of the data's trajectory, implying that rate reductions might be postponed, but could be more pronounced when they do occur," stated James Knightley, chief international economist at ING. This situation probably bolstered the longer-term Treasury bonds, even though they did pull back some of the gains during the overnight session on Thursday. Benchmark 10-year Treasury yields increased by 2 basis points to 4.298 per cent, following a decrease of 7 bps overnight. The aggressive Fed also provided the dollar with a necessary lift, though some selling pressure was once more noticeable in Asia. The dollar index fell 0.1 per cent to 99.80, after rising 0.3 per cent overnight versus its major counterparts.
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On Thursday, MSCI's widest index of Asia-Pacific stocks excluding Japan increased by 0.3 per cent, whereas Japan's Nikkei rose by 0.5 per cent. Chinese blue-chip stocks climbed 0.7 per cent while Hong Kong's Hang Seng index gained 0.8 per cent, regaining losses incurred following Trump's "Liberation Day" tariffs last month, as Beijing's interest rate reductions and stimulus actions eased trade worries. During the night on Wall Street, shares increased following news that the Trump administration intended to revoke and change a regulation from the Biden era that limited the export of advanced artificial-intelligence chips. Nvidia stock surged by 3 per cent. On Wednesday, Trump indicated that Beijing prompted the forthcoming high-level trade discussions and stated he was not ready to reduce U.S. tariffs on Chinese products to bring Beijing to the negotiation table.
China previously stated that it was the U.S. that expressed an interest in engaging in talks. Trump's remarks highlighted the recent conflicting signals from Washington regarding de-escalation of the Sino-U.S. trade war, but analysts suggest that the Geneva meeting may assist in alleviating tensions. Kyle Rodda, a senior analyst at Capital.com, stated, "For the remainder of the week, investors will probably be waiting for U.S.-China trade talks with a cautious, if not somewhat optimistic, outlook." In the commodities markets, oil prices rebounded after declining over $1 on Wednesday. U.S. crude futures increased by 0.7 per cent to $58.50 per barrel, while Brent climbed 0.6 per cent to $61.50 a barrel for the day. In precious metals, gold prices increased by 0.3 per cent to $3,374.5 per ounce due to uncertainties regarding the Fed's policy outlook, yet remain below its all-time high of $3,500.
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