Asian stocks ended a strong week slightly lower on Friday as excitement over U.S.-China trade talks cooled. Meanwhile, bond markets rallied due to renewed hopes for policy easing in the United States.
Oil prices steadied after dropping more than 2% overnight on news of a possible U.S.-Iran nuclear deal. Despite the recent dip, oil is still up about 1% for the week, supported by a brighter global economic outlook.
In Asia, Alibaba shares dropped sharply, falling 6.8% after the company reported quarterly revenue that disappointed investors. Its U.S.-listed shares also fell 7.6% overnight.
This week saw global stock markets rise strongly, driven by optimism about a truce in the U.S.-China trade war. This eased fears of a global recession. However, some caution returned as the weekend approached.
Investors sold off the U.S. dollar against safe-haven currencies on Friday. The dollar weakened 0.4% against the Japanese yen and slipped 0.3% versus the Swiss franc.
Kyle Rodda, senior analyst at Capital.com, said, “Markets face less risk carrying open positions over the weekend than before, with no major trade talks or big events on the calendar. Still, under the current U.S. administration, there’s always a slight risk going into the weekend — a negative surprise could come from a sudden social media post.”
The MSCI Asia-Pacific index (excluding Japan) edged down 0.1% to 613.4 on Friday but is still on track for a weekly gain of more than 3%. Goldman Sachs raised its 12-month target for the index from 620 to 660.
Chinese blue-chip stocks fell 0.2%, while Hong Kong’s Hang Seng index dropped 0.6%. Japan’s Nikkei declined 0.4% after data showed Japan’s economy shrank for the first time in a year during the March quarter. This highlights the fragile nature of Japan’s recovery, now threatened by U.S. trade policies.
In the U.S., futures for the Nasdaq and S&P 500 were both down 0.1%, following a mixed close on Wall Street. Retail sales were weak, and producer prices fell unexpectedly in April. These factors increased market expectations for a total of 56 basis points in Federal Reserve interest rate cuts this year.
This news helped U.S. Treasury bonds rally after a tough week. The 10-year Treasury yield fell 3 basis points to 4.424% on Friday, after dropping 7 basis points overnight. For the week, yields are still up 8 basis points. The two-year yield also fell 2 basis points to 3.947%, after an 8 basis point drop overnight.
Federal Reserve Chair Jerome Powell said on Thursday that policymakers need to rethink their approach to balancing jobs and inflation in monetary policy.
In commodities, oil prices steadied. U.S. crude futures rose slightly by 0.1% to $61.71 per barrel, while Brent crude was up 0.1% to $64.61 a barrel.
Gold prices fell 0.5% to $1,323 an ounce after a 2% rally overnight. For the week, gold is down 3%.
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