Asian Stocks Rise on Hopes of Fed, Alphabet Rate Cuts
Asian stocks rose at the open on Friday after optimism about the Federal Reserve cutting interest rates sooner than anticipated fueled a rally in U.S. stocks and Alphabet Inc. reported solid earnings.
Shares in South Korea rose 1.1% after Treasury Secretary Scott Bessent said the U.S. could reach a “deal of understanding” on trade as early as next week. Equities in Japan rose 1% after the S&P 500 jumped on Thursday to its highest level since President Donald Trump announced his tariffs. Gold and a gauge of the dollar edged higher.
Google parent Alphabet rose 4.9% in after-hours trading after reporting first-quarter revenue and profit that beat analysts’ estimates. That helped futures for the S&P 500 and Nasdaq 100 gain 0.4% in early Asian trading.
Global stocks have advanced for three straight days as optimism that the White House will reach a landmark trade deal with major economic partners has boosted risk appetite. Comments from Fed officials saying they would be open to lowering interest rates if the central bank gathers clear evidence about where the economy is headed also boosted sentiment.
“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, particularly rising layoffs,” said Ulrike Hoffmann-Burchardi, chief investment officer for global equities at UBS Global Wealth Management.
Fed Governor Christopher Waller said he would support lowering interest rates if aggressive tariffs hurt the job market, speaking in an interview on Bloomberg Television. Cleveland Fed President Beth Hammack told CNBC that the central bank could move rates as early as June if it had clear evidence about where the economy is headed.
On trade negotiations, President Donald Trump said his administration is talking to China about trade, after Beijing denied any negotiations were taking place and demanded the U.S. lift all unilateral tariffs. “They had a meeting this morning,” Trump said Thursday. “It doesn’t matter who ‘they’ are. We’ll probably reveal it later, but they had a meeting this morning, and we’ve met with China.” Dozens of countries have appealed to the Trump administration for relief from higher tariffs that have been suspended for 90 days to allow time for talks.
The U.S.-South Korea discussions have been “very successful,” Bessent said. That follows the U.S. making “significant progress” toward a bilateral trade deal with India. Meanwhile, Japan intends to resist any U.S. effort to bring it into an economic bloc allied with China because of the importance of Tokyo’s trade ties with Beijing, according to current and former Japanese government officials.
Some analysts are souring on the earnings outlook for companies because of the risk of an economic slowdown, with U.S. benchmark earnings revisions across the board — or upgrade versus downgrade estimates — hovering near the negative extreme.
One of Wall Street’s biggest proponents expects tariffs to hit U.S. companies the hardest. Deutsche Bank AG’s Bankim Chadha cut his year-end S&P 500 target by 12% to 6,150. He also sees S&P 500 earnings falling 5% this year, compared with a consensus forecast for 8% growth. “Investors should continue to focus on the long term, looking at companies with high earnings potential, limited tariff exposure and quality balance sheets,” said Daniel Skelly, head of Morgan Stanley Wealth Management’s Market Research & Strategy Team.
Source: Bloomberg
