Asian stocks, bonds climb as trade-truce rally holds

Asian equities followed Wall Street higher in a sign the stock market rally has further to run. Treasuries advanced on Thursday as traders priced in two Federal Reserve rate cuts this year.

Shares in South Korea and Australia climbed early Friday, while Japan’s were mixed. US futures inched higher after the S&P 500 rose 0.4% Thursday. Canada’s stock benchmark hit a record with an eight-day rally.

Caution still lurked in the background after a furious rally spurred worries about an overheated market, with the pendulum swinging in favor of defensive dividend-payers that had underperformed in the past month.

Meta Platforms Inc. paced losses in big tech on a news report it was delaying the rollout of a flagship AI model. In late hours, Applied Materials Inc. gave a tepid forecast. And Alibaba Group Holding Ltd.’s quarterly revenue grew a disappointing 7%, reflecting pressure on Chinese consumers.

Treasuries were steady in Asian trading on Friday after a Thursday rally as prices paid to US producers unexpectedly declined by the most in five years suggesting companies are absorbing some of the hit from higher tariffs. Australian and New Zealand yields fell.

Separate US economic data showed growth in retail sales decelerated. Factory production declined for the first time in six months while New York state manufacturing contracted again. And confidence among homebuilders slumped.

“If you are in the stagflation camp, these data aren’t confirming your thesis,” said Jamie Cox at Harris Financial Group. “While growth is slowing, disinflation remains intact.”

The bond rally on Thursday sent yields down 10 basis points or more for debt maturing in two to 10 years. Longer-dated bonds were earlier whipsawed by large trades that briefly pushed the 30-year yield to nearly 5%. A dollar gauge lost 0.2% Thursday and was flat early Friday.

“Bad news is good news for the bond market” as Thursday’s data — including producer prices and retail sales — pointed to a weaker economy, said Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights Inc.

In Asia, US President Donald Trump said India had made an offer to drop tariffs on US goods, as the Asian nation negotiates a deal to avert higher import taxes. India was one of the first countries to begin trade negotiations with the US following Prime Minister Narendra Modi’s visit to the White House in February.

Elsewhere, Japan’s economy shrank for the first time in a year, illustrating its vulnerability even before sustaining the impact of Trump’s tariff measures. The yen gained 0.2% on Friday to trade around 145 per dollar.

Other data set for release in the region includes gross-domestic product for Malaysia and Hong Kong, inflation expectations for New Zealand and international reserves for Thailand. Bank of Japan official Toyoaki Nakamura will speak later in the day.

Stock Rally

Stocks are now trading like last month’s rout never happened. The S&P 500 is about 4% away from an all-time high, while the Nasdaq 100 swung from a bear market back into a bull market. The advance is building as economic tensions between the US and China ease and the White House appears to be softening its approach to trade negotiations.

“I don’t want to get too excited, but we may actually be able to focus on company fundamentals for a while this summer,” said Lamar Villere, portfolio manager at Villere & Co. “If you’d told me a month ago that stocks would be up year-to-date when my kids finished their exams, I’d have called you a liar.”

Still, there’s little clarity over how the existing levies might impact the US economy or the trajectory the global trade war will take in coming months.

Fed Governor Michael Barr said the economy is on solid ground, but warned tariff-related supply-chain disruptions could lead to lower growth and higher inflation.

Recession remains a possibility as tariff fallout continues to buffet global economies, according to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon.

“Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” Dimon said in a Bloomberg Television interview Thursday at JPMorgan’s annual Global Markets Conference in Paris. “If there is a recession, I don’t know how big it would be or how long it would last.”

Wells Fargo Investment Institute sees economic growth, clarity around Trump’s tariffs and continued earnings growth driving further stock-market gains through the rest of this year and next.

In commodities, oil rebounded on Friday after slumping in its previous session as President Donald Trump said the US and Iran are getting closer to a deal regarding Tehran’s nuclear program. Gold was little changed.