Asian Stocks Start Cautious, U.S. Treasury Bonds Hold Gains
Asian stocks started weakly on Friday and U.S. Treasury bonds held gains on Thursday in signs of easing U.S. fiscal concerns that rattled markets earlier in the week.
A gauge of regional stocks rose 0.1%, led by Japanese shares. U.S. stock futures were mixed in early Asian trade after the S&P 500 ended slightly lower for its third straight day of losses. U.S. Treasury bonds were steady after rallying on Thursday as U.S. fiscal concerns eased. The 30-year yield was little changed at 5.04%. The dollar index was steady on Friday after rising 0.2% in the previous session. Thursday’s recovery in Treasury bonds came after a recent selloff in the bond market to reflect concerns about the U.S.’s soaring debt burden, with concerns heightened after Moody’s Ratings on May 16 downgraded the country’s top credit rating.
Investors worry that President Donald Trump’s signature tax bill, which narrowly passed the House, will widen the nation’s already ballooning deficit. "Market volatility has returned amid renewed uncertainty around trade policy and the fiscal outlook," said Mark Haefele at UBS Global Wealth Management. "With bond yields rising and tariff and budget risks in focus, this volatility could persist as investors monitor further developments in policy." The Treasury rally was broadly supported by economic readings. U.S. business activity and output expectations improved as trade concerns eased even as price pressures continued to rise. In a sign of a still-healthy labor market, initial jobless claims fell to a four-week low. Elsewhere, existing home sales fell unexpectedly.
"The 'tough' economic data still doesn't indicate the U.S. economy is in trouble," said Don Rissmiller at Strategas.
Source: Bloomberg
