Asia: Stocks climb, dollar holds on trade hopes and rate bets
[HONG KONG] Asian markets rose on Friday on fresh trade hopes and the dollar held around three-year lows amid bets of cuts to US interest rate cuts.
Easing concerns about Middle East tensions also added to the upbeat mood.
With the Israel-Iran ceasefire holding for now, investors were able to turn their attention back to the economy and Donald Trump's tariffs as a deadline for countries to strike deals with Washington approaches.
Bets on a Federal Reserve rate cut jumped this week after the US president said he had candidates in mind to succeed boss Jerome Powell when he leaves next year, with reports saying he would make an announcement as early as September.
That was followed Thursday by data showing the world's top economy contracted more than previously estimated in the first quarter and consumer spending grew less than expected.
Traders are now fully expecting two rate cuts this year, while there was a pick-up in bets on a third, according to Bloomberg News.
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Powell, who has faced pressure from Trump to move sooner, appeared to take a dovish turn in a deposition to lawmakers this week, while several other Fed officials have also hinted at a softer approach.
All three main indexes on Wall Street rallied, with the Nasdaq hitting a record high and the S&P 500 within a whisker of a new closing peak.
The buying continued into Asia, with Tokyo rallying more than one per cent to break 40,000 for the first time since January, while Hong Kong, Shanghai, Sydney and Singapore were also well up.
The prospect of lower borrowing costs sent the Dollar Index, which compares the greenback to a basket of major currencies, to its lowest level since March 2022.
And while it edged slightly higher on Friday it remained under pressure.
Trade war worries were also soothed slightly Thursday after the White House said Trump could extend his deadline for agreeing deals to avert painful tariffs.
The president announced a swathe of levies on trading partners at the start of April but quickly said he would pause them until July 9 to allow for talks but few agreements have been reached so far.
When asked if there would be another delay, press secretary Karoline Leavitt told reporters: 'Perhaps it could be extended, but that's a decision for the president to make.
'The deadline is not critical.
'The president can simply provide these countries with a deal if they refuse to make us one by the deadline.'
This means Trump can 'pick a reciprocal tariff rate that he believes is advantageous for the United States', she added.
The administration also signalled progress on trade with China, with US Commerce Secretary Howard Lutnick saying they had 'signed and sealed' an understanding reached in Geneva last month.
Those talks saw the two slash eye-watering tit-for-tat tariffs and address other key issues including China's export of rare earths used in smartphones and electric vehicles, while Beijing was keen to see an easing of restrictions on its access to tech goods.
In company news, Chinese smartphone maker Xiaomi soared eight per cent to a record high in Hong Kong as it enjoyed strong early orders for its latest sports utility vehicle, its second foray into the competitive electric vehicle market. AFP
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Straits Times
40 minutes ago
- Straits Times
Trump ends trade talks with Canada over digital services tax, threatens to set tariff
Mr Carney (left) and Mr Trump recently met at the Group of Seven leaders' summit in Canada and agreed to try to hash out an agreement by the middle of July. PHOTO: REUTERS WASHINGTON – US President Donald Trump said he was ending all trade discussions with Canada in retaliation for the country's digital services tax, and threatened to impose a fresh tariff rate within the next week. 'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period,' Mr Trump posted on June 27, on social media. Canada and the US have one of the world's largest bilateral trading relationships, exchanging more than US$900 billion (S$1.14 trillion) of goods and services in 2024. Canadian Prime Minister Mark Carney, speaking briefly to a television reporter, said he had not spoken with Mr Trump yet, on June 27. 'We'll continue to conduct these complex negotiations in the best interests of Canadians,' he said. The Canadian dollar dropped more than 0.5 per cent almost immediately after Mr Trump's post before paring those losses. Canada's benchmark equity index fell, and the shares of companies that rely on moving goods across the border, including General Motors and apparel maker Canada Goose Holdings, also took a hit. Dozens of countries face a July 9 deadline for Mr Trump's higher tariffs to kick back into place, and have been engaged in negotiations with the US. That deadline does not apply to Canada and Mexico. The president imposed tariffs on the US' North American neighbours earlier this year over fentanyl trafficking and migration concerns, and talks with them are being handled on a separate track. Last week, Mr Trump and Mr Carney met at the Group of Seven leaders' summit and agreed to try to hash out an agreement by the middle of July. Canadian business groups and some politicians quickly applied pressure on Mr Carney to drop the digital tax. 'In an effort to get trade negotiations back on track, Canada should put forward an immediate proposal to eliminate the DST in exchange for an elimination of tariffs from the United States,' said Mr Goldy Hyder, chief executive officer of the Business Council of Canada. Ontario Premier Doug Ford reiterated his call for the prime minister to abandon the digital tax. 'We've long supported the idea that global tech giants should pay their fair share in the countries where they operate. But the digital services tax hasn't achieved that,' the Council of Canadian Innovators, which represents technology executives, said in a statement. 'It's functionally a pass-through cost paid by Canadian advertisers and consumers, and it leaves our economy exposed to draconian trade retaliation.' More on this Topic Carney says he and Trump aiming for Canada-US deal within 30 days US Treasury Secretary Scott Bessent on June 26 announced a deal with G-7 allies that will exclude US companies from some taxes imposed by other countries in exchange for removing the Section 899 'revenge tax.' However, the deal did not address digital services taxes placed on large technology firms by some countries, which are opposed by Mr Trump and his officials. Canada's digital services tax is not new. It was passed into law a year ago, but companies have not had to pay it yet. Mr Carney's government is poised to proceed with implementing it, however, with the first payments due on June 30, the country's finance department said earlier on June 27. Business groups in the country have opposed the levy, arguing it would increase the cost of services and invite retaliation by the US. A group of 21 US lawmakers wrote to Mr Trump earlier this month asking him to push for the tax's removal, estimating it will cost American companies US$2 billion. Mr Trump in his trade push has long railed against taxes and other non-tariff barriers, casting them as an impediment to US exporters. The Canadian digital services tax is similar to those implemented by other countries, including the UK. The levy is 3 per cent of the digital services revenue that a firm makes from Canadian users above C$20 million (S$18 million) in a year. It would apply to companies including Meta Platforms and Alphabet, and has been criticised by other technology companies such as Uber Technologies and Etsy. However, Canadian Finance Minister Francois-Philippe Champagne suggested last week that the digital tax may be renegotiated as part of US-Canada trade discussions. 'Obviously, all of that is something that we're considering as part of broader discussions that you may have,' he said. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
CNA
2 hours ago
- CNA
Dollar gains as Trump reignites trade concerns
NEW YORK :The dollar retraced earlier losses against the euro on Friday after U.S. President Donald Trump said the United States was ending trade talks with Canada and that he would consider bombing Iran again, denting risk appetite and sending stocks lower. "Taken together, both messages highlight how erratic Trump is and that any assumptions built into markets can be instantly undermined," said Adam Button, chief currency analyst at ForexLive. "The knee-jerk has been to buy the U.S. dollar but once the smoke clears, that's likely to retrace. The trade war has been a dollar drag all year," Button said. U.S. Treasury Secretary Scott Bessent said earlier on Friday the Trump administration's various trade deals with other countries could be done by the Sept. 1 Labor Day holiday. The Canadian dollar extended losses on the day, however, after Trump said the U.S. is immediately ending trade talks with Canada in response to the country's digital services tax on technology companies. It was last down 0.5 per cent versus the greenback at C$1.37 per dollar. Trump also sharply criticized Iran's Supreme Leader Ali Khamenei, dropped plans to lift sanctions on Iran and said he would consider bombing Iran again if Tehran is enriching uranium to worrisome levels. The dollar dropped to a three-and-a-half-year low against the euro earlier on Friday as traders bet that the Federal Reserve will cut rates more times and possibly sooner than previously expected as some U.S. data points to a weakening economy. A report on Friday showed that U.S. consumer spending unexpectedly fell in May as the boost from the pre-emptive buying of goods like motor vehicles ahead of tariffs faded, while monthly inflation increases remained moderate. A weekly jobs report on Thursday showed that continuing unemployment claims rose to the highest level since November 2021 while gross domestic product figures for the first quarter reflected a sharp downgrade to consumer spending. 'Some of the data that we've had has not been particularly good over the last few days,' said Lou Brien, strategist at DRW Trading in Chicago. Fed Chair Jerome Powell's testimony to U.S. Congress this week was interpreted as dovish after he noted that rate cuts are likely if inflation doesn't increase this summer as he expects. Reports that U.S. President Donald Trump could also appoint a replacement for Powell in the coming months have added to dollar weakness. The new Fed chair is expected to be more dovish and an early appointment could undermine Powell's influence by acting as a shadow chair before Powell's term ends in May. Trump has not decided on Powell's replacement and a decision isn't imminent, a person familiar with the White House's deliberations said on Thursday. Fed rate cuts would reduce the interest rate advantage of the dollar relative to peers. Traders are pricing in 65 basis points of cuts by year end, up from 46 basis points a week ago. The dollar index was little changed on the day at 97.36 and is on pace for a 1.40 per cent weekly decline, the worst since May 19. The euro was last up 0.05 per cent at $1.1705 and reached $1.1754, the highest since September 2021. It is on track for a 1.57 per cent weekly gain, the best since May 19. Sterling weakened 0.19 per cent to $1.3701 and was on track for a 1.85 per cent weekly gain, its best week since May 19. The dollar fell 0.06 per cent to 0.8 Swiss franc and is heading for a 2.26 per cent weekly drop, the largest since April 7. Top U.S. Republicans also confronted a yawning budget hole in their sprawling tax-cut and spending bill on Friday, signaling that they could miss Trump's July 4 deadline as they rewrite dozens of elements rejected by a nonpartisan referee. The long-term outlook for the dollar is seen as challenging as foreign investors reevaluate the 'American exceptionalism' that has drawn investment to the country. Brien said that the impact of the Biden administration's policies was also still weighing on the currency. Former President Joe Biden cut off Russia's access to the U.S. dollar, froze its assets and imposed sanctions following the country's invasion of Ukraine in 2022, which analysts say led other countries to accelerate shifts away from U.S. dollar reliance. 'The Biden administration weaponized the dollar as it really had not been weaponized before,' Brien said. 'That aspect of it is still in the back of people's heads.' Against the yen, the dollar strengthened 0.19 per cent to 144.65. It is headed for a 0.94 per cent weekly decline against the Japanese currency, the largest since May 19. Core consumer inflation in Japan's capital slowed sharply in June due to temporary cuts to utility bills but stayed well above the central bank's 2 per cent target, keeping alive market expectations for further interest rate hikes. In cryptocurrencies, bitcoin fell 0.86 per cent to $106,879.
CNA
2 hours ago
- CNA
US Senate Republicans see delays as they face yawning budget hole on Trump bill
WASHINGTON: Top US Republicans confronted a yawning budget hole in their sprawling tax-cut and spending bill on Friday (Jun 27), signalling that they could miss President Donald Trump's Jul 4 deadline as they rewrite dozens of elements rejected by a nonpartisan referee. With roughly US$600 billion in spending cuts ruled off limits by the Senate parliamentarian, Republicans will have to revise large swaths of the package, which is widely seen as the signature legislation of Trump's second term in office. That includes some of the most divisive elements of the bill, such as a crackdown on Medicaid "provider taxes" that some Senate Republicans fear could threaten rural hospitals. With the legislation still unfinished, Trump acknowledged that Congress might not be able to pass it by his deadline of Jul 4, the US Independence Day holiday. "It's important, it's not the end-all," he told reporters at the White House. "We'd like to get it done by that time, if possible." Asked if the deadline could slip, House of Representatives Speaker Mike Johnson said, "It's possible, but I don't want to even accept that as an option right now," while Senate Majority Leader John Thune said only, "We'll see." Lawmakers will face a far more serious deadline later this summer, when they need to raise the nation's self-imposed debt ceiling or risk a devastating default on the nation's US$36.2 trillion in debt. BILL OVERHAUL Along with Medicaid, the spending cuts at issue also would tighten student aid programmes and limit federal aid to "sanctuary" cities that do not cooperate with federal immigration enforcement, amount to nearly half of the US$1.3 trillion in cuts Republicans have identified to partially offset the bill's US$3.7 trillion in tax breaks. Republicans have also dropped a "retaliatory tax" on foreign investments that would have raised more than US$100 billion, further complicating the budget picture. WIGGLE ROOM They have some wiggle room, as the budget framework they approved earlier this year allows them to increase budget deficits by a total of US$3.3 trillion over 10 years. A version of the bill that passed the House in May would raise deficits by US$2.4 trillion. Nonpartisan experts say that new debt would worsen the nation's fiscal outlook and effectively transfer wealth from younger Americans to older generations. Republicans still must pass the bill out of the Senate and then reconcile any differences with the House before sending it on to Trump to sign into law. With Democrats united in opposition, Republicans can afford to lose no more than three votes from their side in either chamber. Sticking points include healthcare cuts, green-energy incentives and a carve-out for state and local taxes, said Republican Senator Markwayne Mullin of Oklahoma. PARLIAMENTARIAN PUSHBACK Senate Republicans said they would try to rework the provider tax and some of the other rejected elements to meet the approval of Senate Parliamentarian Elizabeth MacDonough, who is tasked with interpreting the chamber's arcane rules. MacDonough has ruled that those elements do not comply with the complex budget rules Republicans are invoking to bypass Democratic opposition. MacDonough so far has rejected healthcare cuts worth a total of US$250 billion, according to Democratic Senator Ron Wyden of Oregon, as well as student-aid cuts worth more than US$300 billion. She has also rejected dozens of other elements of the bill, such as looser regulations for firearms silencers and a forced sale of public lands, that do not have a dramatic budgetary impact. The Republican rewrite has met with some success, as MacDonough signed off on a revised provision that would force states to shoulder more costs of the SNAP food aid programme if they are found to administer it inefficiently, according to Republican Senator John Boozman of Arkansas. The "One Big Beautiful Bill Act" would extend Trump's 2017 tax cuts, fund his immigration crackdown, zero out green-energy incentives passed by his Democratic predecessor Joe Biden, and tighten eligibility for health and food safety net programmes.
