World markets have latched onto the prospect of a gradual rollback of U.S. tariffs to extend their recent recovery from April's trade shock.
Even though it appears the universal 10% levies leveled on all countries' imports to America will remain regardless of bilateral talks underway, there is still some optimism that many of the more extreme 'reciprocal' tariffs may be negotiated away.
Britain's trade deal with Washington on Thursday encouraged those hopes, and investors will be paying close attention to the U.S.-China talks set to begin in Switzerland this weekend.
Wall Street rallied again on Thursday, with the dollar surging to its best levels in a month and U.S. Treasury yields hitting their highest in two weeks. Oil prices gained, the VIX 'fear index' ebbed to the lowest since April 2 and Bitcoin recaptured the $100,000 level to hit its highest since January.
U.S. stock futures held those gains overnight and equities surged in Japan and Taiwan. MSCI's all-country stock index is back in positive territory for the year to date, even though Wall Street indexes remain in the red for 2025.
Tech gains have helped. Nvidia plans to release a downgraded version of its H20 artificial intelligence chip for China in the next two months, following U.S. export restrictions on the original model, sources told Reuters.
But ahead of the weekend talks in Switzerland, China reported a surprisingly big beat in worldwide exports for April as demand from countries seeking to capitalise on the 90-day tariff pause offset a 21% drop in Beijing's bilateral exports to America.
Even that decline in exports to the United States surprised forecasters, who had expected a greater drop given the 145% direct tariffs imposed on China. This suggests many U.S. importers couldn't switch suppliers easily and may have to pass on the higher costs to consumers. This could spur worries about rising consumer prices and put upward pressure on Treasury yields.
Friday's diary sees a parade of top Federal Reserve officials speaking following this week's Fed decision to hold policy rates steady as the central bank waits to see how the trade and inflation picture pans out. April inflation updates are due next week.
President Donald Trump wasted little time in resuming his stinging criticism of Fed Chair Jerome Powell on Thursday, calling him a "fool" for not lowering interest rates.
Vice President JD Vance added to the attacks, saying Powell has "been wrong about almost everything."
Thursday's $25 billion sale of 30-year Treasury bonds jarred in the backdrop. The auction's 2.31 bid-to-cover ratio, a gauge of demand, was the lowest since July 2024 and the 58.9% awarded to indirect bidders, which include foreign investors, was the lowest since 2019.
Elsewhere, UK stocks advanced again as investors digested the runes of Thursday's U.S. trade deal and the Bank of England's quarter-point rate cut.
With BoE policymakers surprisingly split on the cut, markets pulled back expectations of further easing this year, and BoE boss Andrew Bailey underlined the fact that tariffs are still set to rise despite the concessions in Thursday's trade deal.
But key parts of the trade deal, particularly how it sidestepped any compromise on food standards, will allow Britain to more easily engage in parallel negotiations with the European Union this month.
