Asian Shares Start Cautious, Treasuries Hold Gains: Markets Wrap

99)soefcwrm6km]b6j2zdujh_media_dl_1.png Bloomberg

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(Bloomberg) — Asian shares were off to a tepid start at the open Friday and Treasuries held Thursday’s gains in a sign of calming US fiscal fears that rocked markets earlier in the week.

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A regional stock gauge made a 0.1% gain led by Japanese shares. US equity-index futures fluctuated in early Asian trading after the S&P 500 ended fractionally lower for its third daily decline. Treasuries steadied after rallying across the curve Thursday on moderating US fiscal concerns. The 30-year yield was little changed at 5.04%. An index of the dollar was steady Friday after rising 0.2% in the prior session. 

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Thursday’s rebound in Treasuries came after the bond market sold off recently to reflect worries about surging debt load of the US, with anxiety being amplified after Moody’s Ratings on May 16 downgraded the nation’s top credit rating. Investors are concerned that President Donald Trump’s signature tax bill, which narrowly passed the House, would boost the nation’s already swelling deficit.

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“Market volatility has resurfaced amid renewed uncertainty surrounding trade policy and the fiscal outlook,” said Mark Haefele at UBS Global Wealth Management. “With bond yields elevated and tariff and budget risks in focus, this volatility may persist as investors monitor further developments in policy.”

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The Treasuries rally was broadly supported by economic readings. US business activity and output expectations improved as trade-related anxiety eased even as price pressures continued to mount. In a sign of a still healthy labor market, initial jobless claims dropped to the lowest in four weeks. Elsewhere, existing home sales unexpectedly fell.

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“The ‘hard’ economic data still do not indicate a US economy in distress,” said Don Rissmiller at Strategas. 

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In Japan, the key inflation gauge accelerated at the fastest clip in two years, fueled by rising food and energy costs. Consumer prices excluding fresh food rose 3.5% from a year earlier in April, quickening from a 3.2% gain in the previous month. The yen was slightly stronger.

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Markets Live Strategist Mark Cranfield says:

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JGB futures look set for a soft Friday after Japan’s CPI came in above estimates, with core numbers climbing to 3.5%. It looks as though JGBs won’t be getting any of the positive read across from higher Treasuries.

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Meanwhile, Federal Reserve Governor Christopher Waller said the central bank could cut interest rates in the second half of 2025 if the Trump administration’s tariffs on US trading partners settle around 10%.

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“If we can get the tariffs down closer to 10% and then that’s all sealed, done and delivered somewhere by July, then we’re in good shape for the second half of the year,” Waller said Thursday during an appearance on Fox Business.

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Separately, the US Supreme Court shielded the Fed from Trump’s push to oust top officials at independent federal agencies, in a decision likely to quell concerns that the president might move to fire Jerome Powell.