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Shares rise on trade deal hopes, dollar clings to post-Fed gains
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A senior analyst monitors a screen displaying the FTSE 100 index at IG Group in London on April 7, 2025. (AFP/Benjamin Cremel)
S
hares in Asia rose on Thursday after US President Donald Trump flagged a first trade deal in his global tariff war, while the dollar held most of its overnight gains as markets pushed out the chance of near-term rate cuts.
Nasdaq futures erased earlier losses to rally 1.1 percent, while S&P 500 futures rose 0.8 percent. European stock markets are set for a higher open, with the pan-European STOXX 600 index up 0.9 percent.
Trump said he would announce details about a major trade deal with an unspecified country at a press conference later in the day. The New York Times reported that the deal was with Britain, which sent FTSE futures 0.8 percent higher.
The president's comments came as investors anxiously await planned trade talks between Washington and Beijing on Saturday, which could mark the first step in resolving a damaging trade war between the world's top two economies.
Markets are also keeping their eyes on the Bank of England's policy meeting later in the day where expectations are for a quarter-point rate cut. Additionally, central banks in Sweden and Norway are due to deliver their policy decisions, although no changes are expected.
Overnight, in a widely expected decision, the Federal Reserve left policy rate in the 4.25 percent-4.5 percent range, but said the risks of higher inflation and unemployment had risen. Chair Jerome Powell said it isn't clear if the economy will continue its steady pace of growth, or wilt under mounting uncertainty and a possible spike in inflation.
Markets scaled back the chance of a June rate cut to just 20 percent, from 30 percent a day earlier, while a move in July is now priced at 70 percent, compared with a near-certainty just a week ago.
"This suggests little inclination to move until they are confident of the direction the data is heading, meaning rate cuts could be delayed, but risk being sharper when they come," said James Knightley, chief international economist at ING.
Such a scenario likely supported the longer-dated Treasury bonds, although they did retrace some of the gains overnight on Thursday. Benchmark 10-year Treasury yields rose 2 basis points to 4.298 percent, after falling 7 bps overnight.
The hawkish Fed also gave the dollar a much needed bounce, although some selling pressure was again evident in Asia. The dollar index slipped 0.1 percent to 99.80, having rebounded 0.3 percent overnight against its major peers.
On Thursday, MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent while Japan's Nikkei gained 0.5 percent.
Chinese blue chips rose 0.7 percent and Hong Kong's Hang Seng increased 0.8 percent, recovering ground lost since Trump's "Liberation Day" tariffs last month as Beijing's rate cuts and stimulus measures helped calm trade concerns.
Overnight on Wall Street, stocks rose on reports that the Trump administration was planning to rescind and modify a Biden-era rule that curbed the export of sophisticated artificial-intelligence chips. Nvidia shares jumped 3 percent.
TRADE TALKS
On Wednesday, Trump suggested that Beijing initiated upcoming senior-level trade talks and said he was not willing to cut US tariffs on Chinese goods to get Beijing to the negotiating table.
China has said earlier that it was the US side that had signaled a desire to hold talks.
While Trump's comments underlined the recent mixed signals from Washington on de-escalating the Sino-US trade war, analysts say the Geneva meeting could help ease tensions.
"The rest of the week will likely see investors cautiously, if not slightly auspiciously, awaiting trade talks between the US and China," said Kyle Rodda, a senior analyst at Capital.com.
In commodities markets, oil prices bounced after falling more than $1 on Wednesday. US crude futures rose 0.7 percent to $58.50 a barrel while Brent was at $61.50 per barrel, up 0.6 percent on the day.
In precious metals, gold prices rose 0.3 percent to $3,374.5 an ounce amid the uncertainties about Fed policy outlook, but still short of its record high of $3,500.
