United States (US)
Risk assets ended April on a stronger note, with the S&P 500 rising 2.92% last week — its second straight weekly gain. The rally marked a stark reversal from earlier weakness at the start of April, when Trump announced his Liberation Day tariffs.
Receding fears over US-China trade tensions helped drive the recovery amidst tentative signs of softening by Trump. While a comprehensive resolution remains distant, markets appeared to take comfort in the absence of further escalation and signs that both sides may be inching back toward the negotiating table.
China’s Commerce Ministry confirmed that senior US officials had made several attempts through “relevant parties” to reinitiate trade talks. While no formal negotiations have begun, the shift in tone suggests a willingness to re-engage, helping to soothe sentiment that had been frayed by the sharp escalation in tariffs earlier in the month.
Adding to the positive momentum were strong earnings reports from megacap technology names, including Meta and Microsoft. These results helped to ease concerns over the durability of capital expenditure in artificial intelligence (AI) and growth prospects despite a more challenging macro backdrop.
On the macro front, data out of the US came in mixed. First-quarter GDP surprised to the downside, contracting by 0.3%, largely due to a sharp rise in imports — a likely result of inventory front-loading ahead of expected trade tariffs. Consumer confidence also declined, with the Conference Board’s index dropping nearly eight points to 86, its lowest reading since May 2020.
Additionally, we saw a raft of labour data over the week. Nonfarm payrolls increased by 177,000 in April, ahead of expectations of 138,000. However, the number of job openings fell to 7.2 million in March, the weakest level since September 2024 indicating that employers may be growing more cautious in hiring.
This divergence underscores the broader theme that while hard data continues to hold up reasonably well, soft data particularly sentiment and business surveys points to further weakness ahead. Over the past week, yields were largely unchanged, with the 10-year Treasury finishing at 4.3%, after having traded as low as 4.0% and as high as 4.5% during a volatile April.
Looking ahead, markets will focus on this week’s US Federal Reserve (Fed) policy meeting. While no change in interest rates is expected, investors will be closely watching for any shift in the Fed’s tone. We expect the Fed to stay pat on policy for now, opting to wait for further data before taking further action.
Asia
Asian equities joined the global rebound last week, with the MSCI Asia ex-Japan Index rising 4%. Gains were broad-based, with China up 2.4% and other regional markets advancing between 2% and 4%. The rally was underpinned by hopes of renewed dialogue between the US and China, following reports that both sides are open to resuming trade negotiations. While nothing concrete has yet emerged, the absence of fresh escalation was enough to lift sentiment across risk assets.
Despite the relief rally, economic data across Asia continues to reflect the weight of external headwinds. Manufacturing activity has slowed markedly, with most regional PMI readings now below the 50-point threshold, signalling contraction. This includes major exporters such as China, Indonesia, Korea, and Taiwan — all of which are grappling with softer demand from developed markets. India remains the notable exception, with PMI figures still in expansionary territory.
Helping to offset some of the near-term pressure is the decline in oil prices, which has fallen by -20%YTD to USD 59 per barrel. Lower energy costs should ease inflationary pressures across the region and, in turn, support real incomes and consumer demand. Nevertheless, the overall pace of economic activity in Asia is expected to slow in the 2Q’2024 especially in light of weak US GDP data and its knock-on effects on global trade.
In terms of portfolio positioning, we have maintained a steady cash level of around 5% in our Asian funds We continue to favour markets with stronger domestic demand dynamics such as India and China.
Foreign fund flows into Asia are showing tentative signs of a turn. While not yet signalling a decisive rotation, there has been a mild shift in allocation preference from developed markets to Asia. This was also reflected in the broad-based strength of regional currencies over the week, with the Taiwan dollar strengthening by more than 9% in the past 2-3 days.