Global equity markets advanced on Friday, buoyed by growing optimism that the implementation of reciprocal US tariffs may be weeks away, increasing the likelihood of negotiations that could soften their potential impact.
Asian shares rose for a third consecutive day, while S&P 500 futures signaled further gains following Thursday’s near-record close on Wall Street.
European futures, however, pointed to a slightly lower open.
In currency markets, the dollar remained near a two-month low, while the yen strengthened.
The positive market reaction suggests that investors are primarily focused on the possibility that upcoming trade talks will mitigate the severity of the tariffs.
This sentiment echoes the response to delays imposed on tariffs targeting Canada and Mexico earlier this month.
The Bloomberg Dollar Spot Index has fallen approximately 2.5% from its February high as investors reduce bets that Trump is determined to escalate global tariffs as part of his “America First” policy.
A global stocks gauge is at a record high.
Kyle Rodda, senior market analyst at Capital.com, told Bloomberg, “The fact this is a slow burn approach from Trump, with the chance many of the tariffs will be extinguished, is supporting market sentiment.”
Country-by-country approach: tariffs could take months to finalize
According to Howard Lutnick, Trump’s nominee to lead the Commerce Department, the process of proposing reciprocal tariffs will be undertaken on a country-by-country basis and may take until April to complete, providing further room for negotiation.
Lutnick’s comments followed news that Trump had directed his administration to consider reciprocal tariffs on a wide range of trading partners, specifically naming Japan and South Korea as nations that he believes are taking advantage of the US.
Despite the growing optimism, the majority of respondents (92%) to a Bloomberg survey still anticipate some form of US tariffs to be implemented within six months.
However, opinions vary on the scope and breadth of these tariffs, with just over half expecting tariffs on at least some economies, and over a third anticipating the enactment of universal levies.
Dollar under pressure
An index of the dollar was little changed Friday after its biggest drop in three weeks in the prior session.
Growing speculation that new tariffs are a negotiating tool is undermining the popular trade of betting on the dollar.
Charu Chanana, chief investment strategist at Saxo Markets Pte in Singapore, told Bloomberg, “This is just the start of the dollar unwind. Dollar gains have been driven by tariffs threats and US exceptionalism. It is very clear now that tariffs will be targeted rather than broad, with the underlying motives of national security and trade fairness.”
Treasury markets
Treasuries were little changed in Asian trading after a rally in the prior session.
In Asia, Chinese stocks in Hong Kong extended a recent rally as the nation’s growing capabilities in artificial intelligence boosted optimism over the market’s outlook.
The Hang Seng China Enterprises Index jumped as much as 3% on Friday, getting closer to topping an October peak following a stimulus blitz.
Apple Inc. is working to bring its AI features to China by the middle of this year.
Jefferies Financial Group Inc. warned retail funds flowing into the India’s equity mutual funds is at risk of abating as market returns decline.
The ongoing decline in Indian shares has erased more than $600 billion in market value since hitting a peak in late September.
The benchmark BSE Sensex index fell for the eighth straight session.
Trade talks with India
Trump and Indian Prime Minister Narendra Modi agreed to begin negotiations to address the US trade deficit, with US president seeking to reduce import taxes and Modi focused on growing overall trade between the countries.
Gold traded near a record high.
The precious metal has gained this year, powered by haven demand, setting successive records with potential to line up a test of $3,000 an ounce.
Elsewhere in commodities, oil steadied as the market digested the fallout from Trump’s order of potential reciprocal tariffs on US trading partners.
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