Asian shares surged to their highest levels in more than three years on Friday, tracking a rally on Wall Street, while the US dollar remained under pressure due to concerns over the Federal Reserve’s independence and growing expectations of early interest rate cuts.
Global stock markets appeared poised to end the week on a positive note, with tensions in the Middle East and trade-related uncertainties taking a temporary backseat. MSCI’s broadest index of Asia-Pacific shares outside Japan hit levels not seen since November 2021, while the global gauge of equities marked a record high for the fourth consecutive session.
In European markets, futures pointed to a higher opening, with EUROSTOXX 50 and DAX futures up more than 0.5%, though FTSE futures remained largely unchanged. US stock futures also remained firm, with both the S&P 500 and Nasdaq futures gaining 0.1% each.
Investor sentiment was buoyed by recent developments between Washington and Beijing, where both sides reached an understanding to expedite rare earth shipments to the United States. Additionally, US Treasury Secretary Scott Bessent on Thursday urged Republicans in Congress to drop the controversial Section 899 retaliatory tax proposal following an agreement with G7 countries.
Khoon Goh, head of Asia research at ANZ, said the removal of that provision, which had concerned foreign investors, added to the overall upbeat tone. “The accumulation of these positive developments has contributed to the buoyant market mood we’re seeing,” he said.
Japan’s Nikkei jumped 1.4% and crossed the 40,000 mark for the first time in five months. While stocks in Hong Kong and mainland China saw marginal declines, the CSI 300 index remained on track for a 2.6% weekly gain, its best performance since November 2024.
Meanwhile, the US dollar continued to weaken, driven by speculation about changes at the Federal Reserve. Reports that former President Donald Trump had considered replacing Fed Chair Jerome Powell by September or October led to fears about the erosion of the central bank’s independence. The dollar hovered near a three-and-a-half-year low and was heading for a 1.4% weekly loss, its steepest in more than a month. The greenback has already declined over 10% this year, potentially marking its largest first-half drop since the early 1970s, when currencies began to float freely.
The euro traded near its highest level in over three years at $1.1688, while the British pound was last quoted at $1.3725. Thierry Wizman, global FX and rates strategist at Macquarie Group, said Trump’s reported plans could undermine confidence in US policymaking and the dollar’s reserve currency status.
Expectations of Fed rate cuts have also been fueled by a series of weak US economic data releases. Investors are now awaiting the core PCE price index, the Fed’s preferred inflation metric, due on Friday.
US Treasury yields were mostly steady in Asian trading following declines in the previous session. The two-year yield stood at 3.74%, while the benchmark 10-year yield was at 4.25%.
In commodities, oil prices were set for a weekly decline as the Iran-Israel ceasefire held, easing fears over potential supply disruptions in the Middle East. Brent crude rose 0.58% to $68.12 per barrel, and US crude added 0.6% to $65.63 per barrel. However, both benchmarks were still on track for a weekly loss of over 10%.
Spot gold slipped 1% to $3,294.50 an ounce, as improved risk sentiment reduced demand for the safe-haven asset.