Futures Rise, Dollar Up as US Shutdown Risk Eases: Markets Wrap

(Bloomberg) -- Asian stocks and US and European equity-index futures rallied Friday as signs the US will avoid a government shutdown boosted sentiment. 

Shares in Japan and Australia climbed while the CSI 300 index of mainland China stocks touched the highest level this year, reflecting fresh optimism over the prospect of more policy support to boost consumption. Futures contracts for US equities advanced as a stopgap funding bill looked set to pass and avoid a US government shutdown. That’s a change in mood after the S&P 500’s Thursday drop brought its three-week rout past 10%, called a correction in trader parlance. The Nasdaq 100, also in a correction, fell 1.9%.

Treasuries eased up some of the gains from the prior session, when investors dashed to haven assets in a move that lifted gold to a record and supported an the dollar. Gains for the greenback extended into Friday, strengthening a gauge of the dollar for a third day.

“A short-term rebound is likely,” said Bo Pei, an analyst at US Tiger Securities. “The reasoning is straightforward: extreme market moves are often followed by reversions.”

Avoiding the government close down removes an uncertainty for the markets, already nervous about economic growth in the US due to the tariff war of President Donald Trump. Two months into his presidency, sentiment in Wall Street has turned from optimism to nervousness. The slump has erased $5 trillion from US stocks as investors pared risk and prompted some investors to move money away from America to markets in Asia, especially China.

“We are very positive on the A-share and H-share markets because we see actually the rotation is there,” William Ma, founder and chief investment officer of GROW Investment Group, said on Bloomberg Television. The firm expects earnings growth to lift mainland and Hong Kong equities, he said.

Shutdown Optimism

Congressional Democrats and Republicans have been engaged in a high-stakes game of chicken over Democrats’ insistence that a spending package include some restraints on Elon Musk’s DOGE’s cost-cutting crusade, with Republicans refusing and daring the opposition party to risk blame for a shutdown. Senate Democratic leader Chuck Schumer dropped his threat to block a Republican spending bill, opening the way to avoid a US government shutdown.

Treasuries rallied Thursday taking four basis points off the US 10-year yield which ended the session at 4.27% while an index of the dollar edged higher, as investors sought haven assets. US wholesale inflation stagnated in February thanks to a sharp decline in trade margins.

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“It’s a very volatile environment and we expect this to continue in the foreseeable future,” Thomas Taw, head of APAC investment strategy, for BlackRock, said on Bloomberg Television. He said equity markets “like Europe and to some extent China,” have emerged as compelling opportunities as US shares have fallen from record highs.

In another sign of a trade-war escalation, Trump threatened to enact a 200% tariff on European wine, champagne and other alcoholic beverages. Later Thursday, Trump said he would not repeal tariffs on steel and aluminum that took effect this week, nor back off plans for sweeping reciprocal tariffs on global trading parters set to start as soon as April 2.

In Asia, consumption stocks drove Chinese shares higher on policy hopes and gold miner shares tracked a rise in bullion. CK Hutchison Holdings Ltd. plunged Friday after China’s top office on Hong Kong issues reposted a sharp attack on the conglomerate’s decision to appease Trump by selling its stake in Panama ports. 

US Recession

Former Treasury Secretary Steven Mnuchin discounted risks of a US recession, and played down the current selloff in equities, advising investors against overreacting to Trump’s aggressive trade tactics.

“We came in with the market being fully priced, so I think a 5% to 10% correction on the S&P or the Nasdaq actually makes sense,” Mnuchin said in a Bloomberg interview Thursday.

The Federal Reserve’s Treasury-based recession model flagged year-ahead recession risk a year ago, and may be proven right if tariff uncertainty continues to hamper economic activity, according to Gina Martin Adams and Michael Casper at Bloomberg Intelligence. 

Historically, a model reading exceeding 30% has accurately predicted recession one year out. And the current probability is 29.76%.

“The Treasury market is flirting with recession signals, helping amplify the risk-off sentiment in equities, while at the same time sending an alternative message of relative calm with relatively tight credit spreads,” they added.

However, US equities are pricing in a recession risk much bigger than credit markets, leaving room for a positive surprise, JPMorgan Chase & Co. strategists including Nikolaos Panigirtzoglou and Mika Inkinen wrote in a note.

“While there is clearly elevated uncertainty in the near term as the Trump Administration has at least initially prioritized more disruptive polices, the risk is that credit markets are proven right,” they said.

Elsewhere, oil pared weekly loss after US sanctions offset a bleak outlook. An $8 billion exchange-traded fund tracking junk bonds saw one of its biggest losses in 2025. Bitcoin rebounded Friday after declining Thursday.

Key events this week:

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.7% as of 1:42 p.m. Tokyo time
• Japan’s Topix rose 0.8%
• Australia’s S&P/ASX 200 rose 0.5%
• Hong Kong’s Hang Seng rose 2.5%
• The Shanghai Composite rose 1.6%
• Euro Stoxx 50 futures rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.1% to $1.0839
• The Japanese yen fell 0.5% to 148.52 per dollar
• The offshore yuan was little changed at 7.2437 per dollar

Cryptocurrencies

• Bitcoin rose 2% to $81,892.99
• Ether rose 2.7% to $1,891.63

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.29%
• Australia’s 10-year yield was little changed at 4.42%

Commodities

• West Texas Intermediate crude rose 0.7% to $67.01 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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