Asian stock markets advanced broadly at the open on Friday, taking strong cues from a powerful rally on Wall Street overnight.
Investor optimism was largely driven by rising expectations for earlier-than-anticipated interest rate cuts from the US Federal Reserve, coupled with encouraging earnings results from technology giant Alphabet Inc., though underlying caution regarding global trade persisted.
The positive sentiment sweeping through the region followed a stellar performance in US markets, where stocks surged on Thursday.
The key MSCI Asia Pacific ex-Japan index reflected this, trading 0.11% higher at 569.53.
Japan’s Nikkei 225 led the charge among major indices, climbing over 1.39 per cent, while South Korea’s Kospi gained as much as 1 per cent, and Australia’s S&P/ASX 200 rose 0.6 per cent.
A significant catalyst for the improved risk appetite stemmed from comments by Federal Reserve officials suggesting increased openness to monetary policy easing.
Fed Governor Christopher Waller indicated support for rate cuts should aggressive tariff levels negatively impact the jobs market.
Similarly, Cleveland Fed President Beth Hammack mentioned the possibility of rate adjustments as early as June if clear economic signals emerge.
“While the Fed has maintained a cautious approach to monetary easing, we believe it will be willing and able to respond to signs of economic weakness, especially rising layoffs,” noted Ulrike Hoffmann-Burchardi, chief investment officer for global equities at UBS Global Wealth Management, echoing the market’s interpretation.
Tech gains boosted by Alphabet beat
Adding significant fuel to the rally was positive news from the tech sector.
Google-parent Alphabet Inc. reported first-quarter revenue and profit that exceeded analysts’ estimates after the US market close Thursday.
This strong performance sent Alphabet shares up 4.9% in after-hours trading and provided an immediate lift to futures contracts for the S&P 500 and Nasdaq 100, which gained 0.4% in early Asian trading, further bolstering regional sentiment.
The S&P 500 had already jumped on Thursday to its highest close since the day President Donald Trump initially announced his broad tariff offensive.
While Fed hopes and tech strength dominated the immediate narrative, the global trade situation remained a source of underlying caution.
Global stocks had advanced for three straight days, partly reflecting optimism that the White House might secure trade deals with key partners.
Treasury Secretary Scott Bessent fueled some of this optimism, suggesting the US might reach an “agreement of understanding” with South Korea on trade as soon as next week, following reports of “significant progress” with India.
However, the crucial US-China relationship remained complex.
President Donald Trump stated Thursday that talks were occurring, despite prior denials from Beijing and demands for the US to revoke unilateral tariffs.
“They had a meeting this morning,” Trump said Thursday. “It doesn’t matter who ‘they’ is… we’ve been meeting with China.”
Meanwhile, reports indicated Japan intends to resist US efforts to draw it into an economic bloc specifically targeting China, underscoring the geopolitical complexities.
Analyst caution amidst market gains
Despite the multi-day rally, some market analysts advised caution, pointing to potential headwinds.
Concerns persist that the risk of an economic slowdown, potentially exacerbated by tariffs, could negatively impact corporate profits.
Measures of earnings revisions breadth for the S&P 500 are reportedly approaching pessimistic extremes.
Deutsche Bank AG’s Bankim Chadha, previously a noted bull, significantly slashed his year-end S&P 500 target by 12% to 6,150, forecasting a 5% earnings decline this year versus the consensus expectation of 8% growth, citing tariff impacts.
Amidst this uncertainty, the advice from strategists like Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team, is pragmatic.
“Investors should continue to focus on the long term, with an eye toward companies with high earnings achievability, limited tariff exposure, and quality balance sheets,” he told Bloomberg.
Commodities and currencies reflect shifting sentiment
In commodity markets, gold futures traded with modest gains, supported by a generally weaker US dollar, though prices remained below the record highs hit earlier in the week (last trading around $3,362.89 per ounce).
Silver futures also saw gains. The slightly weaker dollar environment generally supports risk assets in emerging markets and commodity prices.
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