Asian equities bounced back from earlier losses, and equity-index futures gained on Friday, as optimism surrounding the US government’s potential to avoid a shutdown fueled positive sentiment across global markets.
Stocks in Japan, Australia, and Hong Kong saw upticks, while US equity futures also advanced. This shift in sentiment came after indications that a stopgap funding bill was likely to pass, averting the risk of a government shutdown. On Thursday, the S&P 500 plunged 1.4%, hitting a six-month low, marking a three-week slide exceeding 10%—a move that traders often refer to as a correction. Similarly, the Nasdaq 100, also in correction territory, fell by 1.9%.
US Treasury yields remained stable on Friday after rallying in the prior session, as investors sought haven assets. Gold prices soared to a record high, while the dollar index gained for the third consecutive day.
The resolution of the potential shutdown eased one of the uncertainties that had weighed on market sentiment, particularly at a time when economic growth concerns were already heightened by the ongoing US-China tariff war. Despite initial optimism at the beginning of President Donald Trump’s term, Wall Street has seen a shift in mood, with $5 trillion erased from US equity benchmarks amid growing caution among investors.
Bo Pei, an analyst at US Tiger Securities, pointed out that “a short-term rebound is likely,” noting that sharp market movements are often followed by a reversal.
The political standoff in Congress between Democrats and Republicans, centered around funding packages, seemed poised to ease after Senate Democratic leader Chuck Schumer withdrew his objection to the Republican spending bill. This opened the door for a resolution and the potential to avoid a government shutdown.
Treasuries rallied on Thursday, pushing the US 10-year yield down by four basis points to 4.27%, while the dollar gained slightly as investors sought safe-haven assets. In addition, US wholesale inflation stagnated in February, largely due to a significant drop in trade margins.
Thomas Taw, BlackRock’s head of APAC investment strategy, emphasized that the market remains volatile and that this trend is expected to persist. However, he highlighted that regions like Europe and China have emerged as attractive investment opportunities as US stocks falter from record highs.
In a development that could signal an intensification of the trade conflict, President Trump threatened to impose a 200% tariff on European wine, champagne, and other alcoholic beverages. Trump also indicated that he would not lift tariffs on steel and aluminum and reaffirmed plans for reciprocal tariffs on global trading partners, set to take effect on April 2.
In Asia, Chinese consumption stocks rose on the back of hopes for policy support, while gold mining stocks tracked the rise in bullion prices. However, shares in CK Hutchison Holdings Ltd. plummeted after China’s top office on Hong Kong issues launched a scathing attack on the conglomerate for its decision to sell its stake in Panama ports to appease Trump.
US Recession Concerns
Former Treasury Secretary Steven Mnuchin downplayed recession risks, advising investors to avoid overreacting to the current sell-off in equities. Mnuchin noted that the market had entered overvalued territory, and a 5% to 10% correction was reasonable under the circumstances.
Bloomberg Intelligence analysts, including Gina Martin Adams and Michael Casper, pointed to signals from the Federal Reserve’s Treasury-based recession model, which has predicted a year-ahead recession risk for the past year. Currently, the probability of a recession is pegged at 29.76%.
Despite the risk of an economic slowdown, the outlook for US equities remains more pessimistic than that reflected in credit markets, according to JPMorgan Chase strategists. They suggest that while uncertainties surrounding the Trump Administration’s policies remain, credit markets could ultimately prove to be more accurate in predicting the future course of the economy.
Meanwhile, oil prices saw a slight recovery from earlier losses, as US sanctions offset a dim outlook. The $8 billion junk bond exchange-traded fund suffered one of its most significant losses in 2025, and Bitcoin rebounded after Thursday’s dip.
Key Market Moves
Stocks:
- S&P 500 futures rose 0.7%
- Japan’s Topix gained 0.4%
- Australia’s S&P/ASX 200 increased 0.5%
- Hong Kong’s Hang Seng surged 1.4%
- Shanghai Composite climbed 1.2%
- Euro Stoxx 50 futures rose 0.1%
Currencies:
- Bloomberg Dollar Spot Index up 0.1%
- Euro down 0.2% to $1.0835
- Japanese yen declined 0.3% to 148.27 per dollar
- Offshore yuan remained steady at 7.2506 per dollar
Cryptocurrencies:
- Bitcoin rose 1.8% to $81,807.29
- Ether gained 2.5% to $1,888.88
Bonds:
- US 10-year Treasury yield rose by one basis point to 4.28%
- Australia’s 10-year yield fell one basis point to 4.40%
Commodities:
- West Texas Intermediate crude increased 0.6% to $66.98 perbarrel
- Spot gold fell 0.1% to $2,985.94 per ounce
As the markets navigate through uncertainty, traders are closely monitoring key data releases, including the University of Michigan consumer sentiment index due for release on Friday. The broader market sentiment will likely continue to be shaped by ongoing political and economic developments both in the US and internationally.
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