SocGen's Overnight Economic News Summary

By Sherry Qin

Asian markets advanced broadly on Friday, lifted by strong U.S. tech earnings and tentative signs of easing U.S.-China trade tensions.

Meta reported robust sales and steady growth guidance, while Microsoft said corporate clients aren't cutting technology spending yet, easing fears that tariffs could hit the Magnificent Seven.

Sentiment also improved after China's Commerce Ministry said it is considering trade talks with the U.S., raising hopes for de-escalation.

The official response from Beijing is seen as a sign of easing and shows China is more willing to hold trade talks with the U.S., ANZ Research senior China strategist Zhaopeng Xing said.

"Markets welcomed signs of easing trade tensions that have driven fears of an economic slowdown," Commerzbank Research analysts said in a note.

Taiwan's Taiex Index led regional gains, rising 3.05%, with TSMC up 4.6% after Meta and Microsoft reaffirmed strong AI-related capex plans. Morgan Stanley said TSMC's "major overhangs" have been largely removed and reinstated the stock as a Top Pick.

Hong Kong's Hang Seng Index closed 1.7% higher and the Hang Seng Tech Index rose 3.1%. Alibaba and Tencent advanced 3.8% and 2.2%, respectively. Chinese auto stocks rose sharply after robust April sales, with XPeng up 6.7% and Xiaomi gaining 6.3%. Japan's Nikkei Stock Average added 1.0%, South Korea's Kospi rose 0.1% and markets in Malaysia, Indonesia and Thailand also gained.

Mainland China markets were closed for the Labor Day holiday.

In commodities, copper rose after Beijing officials raised hopes for lower tariffs. Gold gained 0.5% as safe-haven demand eased amid improving risk sentiment.

In currencies, the yen weakened against most other Group of 10 and Asian currencies on risk-on flows and softer Bank of Japan rate expectations.

The Japanese central bank's language carried a cautious undertone, NAB's senior FX strategist Rodrigo Catril said. "Risks to prices [are] skewed to [the] downside for FY 2025 and FY 2026," he said.

The Australian dollar rose 0.4% to 93.20 yen and the euro edged 0.1% higher to 164.28 yen.

The offshore yuan also strengthened against the dollar as possibilities of trade talks continued to linger, while the Taiwan dollar was 2.5% higher against the greenback on easing trade tensions and a brighter semiconductor outlook.

Write to Sherry Qin at sherry.qin@wsj.com

By Sherry Qin

Asian markets advanced broadly on Friday, lifted by strong U.S. tech earnings and tentative signs of easing U.S.-China trade tensions.

Meta reported robust sales and steady growth guidance, while Microsoft said corporate clients aren't cutting technology spending yet, easing fears that tariffs could hit the Magnificent Seven.

Sentiment also improved after China's Commerce Ministry said it is considering trade talks with the U.S., raising hopes for de-escalation.

"Markets welcomed signs of easing trade tensions that have driven fears of an economic slowdown," Commerzbank Research analysts said in a note.

Taiwan's Taiex Index led regional gains, rising 2.35%, with TSMC up 3.7% after Meta and Microsoft reaffirmed strong AI-related capex plans. Morgan Stanley said TSMC's "major overhangs" have been largely removed and reinstated the stock as a Top Pick.

Hong Kong's Hang Seng Index gained 1.6% and the Hang Seng Tech Index rose 3.2%. Alibaba and Tencent advanced 4.3% and 2.4%, respectively. Japan's Nikkei Stock Average added 1.1% and South Korea's Kospi rose 0.2% and markets in Malaysia, Indonesia and Thailand also gained.

Mainland China markets were closed for the Labor Day holiday.

In commodities, copper rose after Beijing officials raised hopes for lower tariffs. Gold gained 0.5% as safe-haven demand eased amid improving risk sentiment.

In currencies, the yen weakened against most other Group of 10 and Asian currencies on risk-on flows and softer Bank of Japan rate expectations.

The Japanese central bank's language carried a cautious undertone, NAB's senior FX strategist Rodrigo Catril said. "Risks to prices [are] skewed to [the] downside for FY 2025 and FY 2026," he said.

The Australian dollar rose 0.4% to 93.20 yen and the euro edged 0.1% higher to 164.28 yen.

The offshore yuan also strengthened against the dollar as possibilities of trade talks continued to linger, while the Taiwan dollar was 2.5% higher against the greenback on easing trade tensions and a brighter semiconductor outlook.

Write to Sherry Qin at sherry.qin@wsj.com

Moves in the Canadian dollar and risk-sensitive currencies including the Australian dollar, Norwegian krone and Swedish krona suggest markets are complacent about U.S. tariffs, MUFG Bank's Derek Halpenny says in a note. The currencies outperformed Tuesday, which hardly signals tariff concerns and rising risks of global trade disruptions, he says. "We believe the financial markets are underestimating the scale of action." Riskier currencies could fall if the U.S. delivers a more aggressive tariff plan than markets are fearing. Trump announces his reciprocal tariff plans at 1600 ET. The U.S. dollar trades flat at 1.4307 Canadian dollars. The Australian dollar rises 0.5% to $0.6305. The Norwegian krone and Swedish krona edge slightly higher against the euro. (renae.dyer@wsj.com)

Societe Generale in its early Tuesday economic news summary pointed out:

— US dollar rangebound, 10-year United States Treasury dips to 4.18%, Bund slips to 2.71%. The U.S. will announce reciprocal country-based tariffs on Wednesday at 3 p.m. ET.

— The Reserve Bank of Australia leaves CRT on hold at 4.10%, monetary policy remains restrictive, continued decline in underlying inflation is welcome, risks on both sides, sustainably returning inflation to target is the priority. Three-year AGB yield -3bps to 3.67%, +0.1% at 0.6255.

— Japan Q1 Tankan large mfg falls to 12 from 14. Services climbs to 35 from 33. FY 25 average 147.06 and 157.45.

— China's private Caixin manufacturing PMI climbs to 51.2 in March from 50.8 in February. USD/CNH +0.2% at 7.2776.

— Day ahead: U.S. ISM manufacturing, JOLTS job openings. Federal Reserve speaker Barkin. Eurozone flash consumer price index, SocGen forecasts 2.0%. European Central Bank speakers Cipollone, Lagarde, Lane. Bank of England's Greene.

— Nikkei -0.1%, EUR 10-year IRS -3bps at 2.62%, Brent crude +0.6% at $74.9/barrel, Gold +0.6% at $3,136/oz.

AUD/JPY has eased amid weaker risk sentiment and more downside is likely in coming months as the global trade war to intensifies further, sapping risk appetite, says Carol Kong, economist at CBA. The pair will also be weighed down by narrower Australia‑Japan interest rate differentials as the Reserve Bank of Australia keeps cutting rates and the Bank of Japan keeps raising rates, she adds. Monday's Japanese labor cash earnings for January showed wage momentum continued to build which adds to the case for more BoJ rate hikes this year, Kong says. Another positive print on Japan's household spending at 2330 GMT will also bolster expectations of faster BoJ rate hikes, she says. AUD/USD now at 92.30. (james.glynn@wsj.com; @JamesGlynnWSJ)

The main macroeconomic event overnight Monday was the Reserve Bank of Australia's decision to lower rates after keeping them on hold since November 2023, said Mitsubishi UFG.

As widely expected, the RBA cut the policy rate by 25bps to 4.10%. The updated policy statement revealed that the RBA believes "some of the upside risk to inflation appear to have eased and there are signs that disinflation might be occurring a little more quickly than earlier expected."

The decision to "remove a little of the policy restrictiveness" was an acknowledgement that "progress has been made" but it's "cautious" about the outlook, wrote the bank in a note to clients. The RBA has stressed that it will be cautious in delivering further rate cuts which has helped to support the Australian dollar (AUD) overnight Monday, especially against the New Zealand dollar (NZD).

It has lifted to an intra-day high overnight at 1.1141, pointed out MUFG. The pair has been in a narrow range between 1.1000 and 1.1100 for most of this year.

The RBA's caution in delivering further rate cuts continues to stand in contrast to the Reserve Bank of New Zealand which has already cut rates more aggressively by 125bps since its easing cycle started in August and is expected to deliver a third consecutive 50bps at its policy meeting overnight Tuesday, although it's possible that it could signal a slower pace of easing as its policy rate moves closer to estimates of the neutral rate, stated MUFG.

The RBA's caution over delivering further rate cuts reflects ongoing concerns that upside inflation risks remain, added the bank. The RBA expressed concern that "some labor market data have been unexpectedly strong" which suggests that the labor market maybe somewhat tighter than it had previously thought.

The RBA highlighted as well that its central forecast for underlying inflation has been "revised up a little" over 2026. Those updated forecasts suggested to the RBA that "if monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the mid-point of the target range.

In the accompanying press conference, Governor Michele Bullock reinforced the relatively hawkish message by stating "I want to be very clear that today's decision does not imply that further rate cuts along the lines suggested by the markets are coming." The RBA needs to see more data and evidence that inflation is continuing to decline before making decisions about the future path of interest rates, and is "very alert" to upside risks that could derail disinflationary progress.

The comments have made the Australian rate market less confident that the RBA will deliver two further 25bps rate cuts by the end of this year, according to MUFG. The RBA's next rate cut is expected to be delivered by the July policy meeting.

Overall, the RBA's cautious message over the need for further easing is supportive for the Australian dollar which is already one of the top three performing G10 currencies so far this year, according to the bank. The AUF has outperformed recently alongside the strong rebound in commodity prices.