Stocks Rise as U.S. Tariff Tensions Ease; Euro Strengthens Ahead of ECB Decision

Asian stock markets saw gains on Thursday as investor sentiment improved following news that U.S. President Donald Trump had granted a one-month exemption to some automakers from tariffs imposed on Canada and Mexico. This move helped alleviate concerns over the escalating trade war and boosted markets across Asia, with Japan’s Nikkei and Hong Kong’s Hang Seng seeing strong gains. In addition, China’s commitment to supporting its technology sector and domestic consumption further bolstered investor confidence.

However, the global bond market faced significant pressure, particularly after a sharp sell-off in German long-dated bonds, driven by Germany’s discussions to loosen fiscal rules and increase defense spending. This caused a rise in bond yields, including in Japan and Australia, as investors speculated that other countries in the region may follow suit. The increase in government bond yields highlights the growing anxiety over the geopolitical situation and its potential impact on economic stability.

Attention is now turning to the European Central Bank (ECB), which is expected to cut interest rates further amid ongoing trade tensions and regional rearmament. The euro surged ahead of the ECB’s policy meeting, reaching a four-month high, and is poised for its strongest weekly performance since 2009. The strength of the euro was supported by a proposal for a €500 billion infrastructure fund in Germany, though experts caution that it will not immediately solve the country’s economic challenges.

In commodities, gold prices remained stable as markets awaited the U.S. non-farm payrolls report, which could influence the Federal Reserve’s future decisions. Meanwhile, oil prices struggled to recover after a large build in U.S. crude stocks and a larger-than-expected output increase by OPEC+. The mixed performance of oil markets reflected broader concerns over global economic growth and trade disruptions.

SOURCE: REUTERS