Cautious Start for Asian Markets Amid Trade Policy Uncertainty

SYDNEY: Asian stock markets and the U.S. dollar began the week cautiously on Monday, as uncertainty surrounding U.S. trade strategy remained. The week ahead is full of significant economic data releases and earnings reports from major technology firms.

While U.S. President Donald Trump has suggested that progress is being made in trade negotiations with China and other nations, tangible evidence has been scarce. Treasury Secretary Scott Bessent did not confirm Trump’s claim that tariff discussions with China were underway.

Christian Keller, head of economics research at Barclays, commented, “The uncertainty itself is at least as detrimental as the tariffs, affecting the U.S. economy as much as the rest of the world.”

He further cautioned, “Even if the current earnings season continues to display strong results, many companies will likely prepare to reduce activity until there is better clarity. This makes a recession more probable.”

Market Performance
  • Early trading activity was subdued, with MSCI’s index of Asia-Pacific stocks excluding Japan increasing by 0.1%.
  • Japan’s Nikkei index advanced by 0.9%, while South Korea’s market gained 0.2%.
  • EUROSTOXX 50 futures rose by 0.3%, and both FTSE futures and DAX futures saw increases of 0.2%.
  • Conversely, S&P 500 futures declined by 0.4% in early trading, and Nasdaq futures fell by 0.5%.

The S&P 500 has recovered nearly 12% from its low point on April 8, but it is still 10% below its peak.

Corporate Earnings and Economic Data

Corporate earnings have generally been supportive, with gains exceeding 9%. However, BofA noted that 64% of companies have surpassed EPS estimates, compared to 71% in the previous quarter.

Approximately 180 S&P 500 companies, representing more than 40% of the index’s market value, are scheduled to report this week, including major companies like Apple, Microsoft, Amazon, and Meta Platforms.

The week also features important economic news, including U.S. employment figures, gross domestic product, and core inflation data.

Payrolls are anticipated to increase by 135,000, and inflation is projected to decrease, but GDP figures are uncertain due to a surge in gold imports that will negatively impact the headline number.

The median forecast projects a modest 0.4% annualized growth, but the Atlanta Fed GDP Now measure estimates -0.4% excluding gold.

Federal Reserve Policy and Currency Markets

The jobs report is a key release that should help refine market expectations regarding Federal Reserve policy. Futures markets currently indicate a 64% probability of a rate cut in June and 85 basis points of easing by the end of the year.

Jonas Goltermann, deputy chief markets economist at Capital Economics, stated, “We anticipate another strong non-farm payrolls number, which will challenge expectations that the Fed will ease policy in June.”

He added that if this proves correct, it would support the dollar’s recovery from recent three-year lows.

“However, the Trump administration’s unique approach across various policy areas will likely cause lasting damage to confidence in the U.S. as a safe haven,” he cautioned. “The dollar remains vulnerable to the administration’s decisions.”

The dollar index remained steady at 99.695, above last week’s low of 97.923, while the euro held at $1.1350, below its recent high of $1.15783.

Consumer price data for Germany and the euro zone, expected this week, are projected to indicate a further decline in headline inflation, increasing expectations that the European Central Bank will implement another rate cut at its June meeting.

The Bank of Japan is expected to maintain rates at 0.5% at its meeting this week, given that economic and trade uncertainties caused by U.S. tariffs discourage another rate hike.

The dollar has slightly increased to 143.65 yen, from last week’s seven-month low of 139.89, but it is still just over 4% lower for April so far.

Treasuries have also stabilized following Trump’s reassurance that he would not attempt to remove Fed Chair Jerome Powell, leaving 10-year yields at 4.235%, compared to the April high of 4.592%.

The slight improvement in risk sentiment has caused gold to decrease to $3,307 an ounce, from its all-time peak of $3,500.

Oil prices began quietly, having been pressured in recent weeks by concerns about a global economic slowdown and plans for increased supply from OPEC.

Brent crude rose 13 cents to $66.98 a barrel, while U.S. crude added 7 cents to $63.09 per barrel.