Stock market in Asia experiences uplift as indications of lessening China-USA trade conflict emerge.
Rewritten Article:
Singapore - Markets Across Asia Gain Momentum as Trade Talk Hopes Reignite
Stock markets in Asia and USA futures surged on a potential trade talk possibility between the US and China, which momentarily overshadowed worrisome earnings reports from tech giants Apple and Amazon.
China's Commerce Ministry revealed that the USA has shown eagerness to negotiate tariffs, and Beijing welcomes any discussions. This green light to negotiations sent ripples of reassurance through the market, reversing earlier falls in US futures.
The comments sparked a rebound in S&P 500 futures, rising 0.6%, while those for Nasdaq grew 0.3%. Japan's Nikkei scored a 1% increase on a weakening yen, and Taiwan stocks leaped 2%. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4%.
Matt Simpson, Senior Market Analyst at City Index, commented, "While an olive branch has been offered, you can hardly say China has 'come crawling' like Trump had hoped." Even so, the optimistic signals provided by China helped to enhance investor sentiment, easing concerns over the US President's erratic tariff policies that pose threats to global economic stability.
According to recent data, the US economy shrank for the first time in three years in the first quarter, and China's factory activity contracted at its fastest pace in 16 months in April. Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, cautions, "A recession will become likely if the price increases encourage consumers to cut spending and businesses to shrink workforces and cut capital spending. While a recession is not our baseline, it will be a close call this year."
The earnings season has underscored the cost of rapidly shifting US trade policy, with many companies slashing or withdrawing their profit forecasts due to tariffs. However, some companies like Microsoft and Meta Platforms have managed to recover, raising hopes that the tech industry may withstand the tariff storm.
In the currency markets, the yen weakened to its lowest level since April 10 as investors bet on continued geopolitical improvements. The dollar, on the other hand, is on track for its strongest weekly performance since the end of February before the crucial non-farm payrolls data is released later in the day. The dollar index is currently at 100.14.
Non-farm payrolls are estimated to have increased by 130,000 jobs last month after rising by 228,000 in March. The yen's holder, Japan, discussed the possibility of using its huge $1-trillion-plus in US Treasury holdings as a tool for trade negotiations with the USA. This remark came during a meeting between Japan's top trade negotiator, Ryosei Akazawa, and US Treasury Secretary Scott Bessent in Washington.
Gold prices dipped to $3,234.9/oz, marking the weakest weekly performance in two months due to dwindling demand for safe-haven assets. Oil prices climbed after Trump threatened secondary sanctions on Iran, with Brent crude rising 0.56% and US WTI crude gaining 0.6%.
Insights:
- The US and China might strike another tariff negotiation round following tensions alleviation signals.
- Negotiations between the US and China may gain momentum, lifting market sentiment amid fears of escalating tariffs. However, there's no guarantee on a successful outcome, and reverse market movements are possible if the discussions falter.
- The potential for trade talks between the US and China, along with recent positive earnings results from some technology companies, may help the market avoid an imminent recession but won't guarantee it. Apprehension remains until more clarity emerges on currency fluctuations, trade policy, and tariffs.
- The financial industry is closely watching the potential for a new round of tariff negotiations between the US and China, as optimistic signals might help stabilize the economy and markets.
- The commerce minister of China has revealed that the US has expressed a desire to negotiate tariffs, which Beijing welcomes. This development could potentially reformulate the digital trade policy between the two countries.
- In the banking sector, investors are speculating that the yen could further weaken if geopolitical improvements continue, while the dollar is poised for its strongest weekly performance this year before the non-farm payrolls data is released.
- Recent earnings reports from tech giants Apple and Amazon have highlighted the cost of shifting US trade policies, with many companies revising or canceling their profit forecasts due to tariffs.
- Some industry sectors, such as the technology industry, may withstand the tariff storm better than others, with firms like Microsoft and Meta Platforms recovering from the impact.
- Singapore, along with other Asian markets, is experiencing a surge in growth as trade talks hopes between the US and China reignite, with potential impacts on local companies and the Singaporean economy.
- A recession is a possibility this year if price increases encourage consumers to curtail spending and businesses to downsize workforces and cut back on capital spending, according to experts.
- Non-farm payrolls, specifically the number of new jobs created last month, will be a critical indicator of the economy's health, along with other factors like currency fluctuations, trade policy, and tariffs.
- The general news media is reporting that Japan is considering using its vast holdings of US Treasury securities as a bargaining chip in trade negotiations with the USA, raising questions about the policy implications for global economics and the finance industry.
