Asian shares saw modest gains on Friday, and global markets began to recover following a significant selloff, with gold reaching a new record as investors flocked to safe-haven assets amidst growing global trade tensions.
Investor sentiment was lifted by news that a potential U.S. government shutdown could be averted. Senate Democrat Chuck Schumer indicated his party would support a Republican stopgap funding bill, signaling that the necessary votes for government funding would be secured.
U.S. stock futures responded positively, with Nasdaq futures rising by 0.87% and S&P 500 futures climbing 0.7%. European stock futures also saw modest gains, with EUROSTOXX 50 futures increasing by 0.04% and FTSE futures up by 0.1%.
“For today, at least, this news from Congress is positive for market sentiment,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.2%, but it was on track to lose more than 2% for the week, primarily due to ongoing trade disputes weighing heavily on global stocks.
The latest escalation in the U.S.-EU trade conflict saw President Donald Trump threaten to impose a 200% tariff on European wine and spirits unless the European Union removes retaliatory surcharges on American products, including whiskey, set to take effect next month.
“Trump is making it very clear that if anyone were to retaliate, his counter-escalation is going to be even sharper,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho.
The new tariff threats led to a sharp selloff on Wall Street on Thursday, with the S&P 500 officially entering a correction phase, a week after the Nasdaq confirmed the same.
“I think Trump 2.0 is nothing like Trump 1.0. This time, the president seems prepared to let U.S. markets and the economy suffer while he implements his ‘America First’ goals,” remarked Michael Strobaek, global chief investment officer at Lombard Odier.
Meanwhile, gold has benefitted from the heightened trade uncertainty, reaching a record high of $2,990.09 per ounce on Friday. The precious metal is on track to gain 2.6% for the week.
In other markets, Japan’s Nikkei 225 index reversed early losses, rising by 0.12%. Hong Kong’s Hang Seng Index gained 1%, though it remained set for a 2.3% weekly decline. China’s CSI300 blue-chip index advanced 1.4%, poised to end the week with a 0.6% gain.
Dollar Faces Pressure
The U.S. dollar regained some ground on Friday, benefiting from safe-haven inflows, but remained near recent lows as concerns over a potential U.S. recession continued to put pressure on the currency.
The euro traded slightly lower, down 0.1% at $1.0841, while the British pound fell 0.05% to $1.2944. Germany’s fiscal reset plan, which includes a €500 billion fund for infrastructure and reforms to borrowing rules aimed at boosting growth and military spending, provided some support for the euro. The plan will be voted on by Germany’s outgoing parliament on March 18, ahead of the formation of a new parliament on March 25.
Next week, markets will be closely watching central bank meetings, including the U.S. Federal Reserve’s meeting, as investors seek more clarity on the future direction of interest rates amidst uncertainty over President Trump’s trade policies and their potential impact on U.S. growth and inflation.
“Our assessment is the direction of travel is consistent, rates will go lower. It’s just a question of timing,” said Varathan of Mizuho.
“The tariffs will be an inconvenience, but not an impediment to the Fed cuts, because even if prices go up, it’s a negative demand shock and people are worse off, not better off,” he added.
The dollar was up 0.3% against the yen at 148.25, though it was on track for a slight weekly loss against the Japanese currency, as expectations for more rate hikes by the Bank of Japan (BOJ) grew. The BOJ is set to meet next week.
In commodities, oil prices saw a rebound after a decline in the previous session.
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