Morning Bid: Whoah, we're halfway there

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26-04-2025

By Alun John
(Reuters) - What matters in U.S. and global markets today, by Alun John, EMEA Breaking News Correspondent, finance and markets
Wall Street looks set for another up day, thanks to above-expectations earnings from Google, which sent its shares around 6% higher in out-of-hours trading, and further signs that deals will be done to avoid the most extreme trade war.
South Korean and U.S. delegations gave positive signals after their first round of trade talks and Reuters, and others, reported China was considering exempting some U.S. imports from its 125% tariffs.
S&P 500 futures were up around 0.6%, suggesting the index would build on what's already been a 3.8% gain for the week, and the U.S. dollar too was rising on nearly all developed market currencies.
Mike Dolan is enjoying some well-deserved time off this week, but the Reuters markets team is here to provide you with all the information you need to start your day.
Today's Market Minute
* China is considering exempting some U.S. imports from its 125% tariffs and is asking businesses to identify goods that could be eligible.
* Google parent Alphabet reassured jittery tech investors that its AI investments were powering returns at its crucial ad business.
* South Korea and the United States agreed to craft a trade package aimed at removing new U.S. tariffs before the pause on reciprocal tariffs is lifted in July.
* Republicans in the U.S. Congress plan to introduce a sweeping $150 billion defense package that will give an initial $27 billion boost to President Donald Trump's controversial Golden Dome missile defense shield, according to a document and a congressional aide.
* Bank of Japan Governor Kazuo Ueda said on Thursday the central bank would continue to raise interest rates if underlying inflation converges toward its 2% inflation target as projected, but said the central bank would scrutinise how U.S. tariffs could affect this.
Whoah, we're halfway there
The S&P 500, after three straight days of gains, closed Thursday down "only" around 10.7% from its February closing high.
That's not a bad little comeback, given that it was down more than 20% at one point a couple of weeks ago, even if it did not close below that symbolic level.
And with futures pointing to a higher open, the benchmark is set for further gains on Friday - though one would not want to make too many firm predictions with a whole day of trading still to come.
A major part of the bounceback has been driven by the U.S. administration walking back some of its more "out there" positions on Fed independence and tariffs, and getting some positive signs back from the rest of the world too.
Investors have spent weeks agonising about whether the tariff announcement on April 2 was a negotiating tool or a genuine belief, and while we still do not know what the plan was at the time, there's enough going on to give traders hope that the outcome will be a series of deals that see the worst of the duties negotiated away.
After a first round of trade talks in Washington on Thursday, a delegation from Seoul said that South Korea and the United States agreed to craft a trade package aimed at removing new U.S. tariffs before the 90-day pause is lifted in July.
And after some encouragement from Treasury Secretary Scott Bessent this week, China is considering exempting some U.S. imports from its 125% tariffs, Reuters and others have reported.
Some numbers are also helping the mood, with no real sign of a recession in hard economic data, as opposed to surveys, Thursday's initial jobless claims were the latest to come in fine.
Again, it does not tell us anything much about the future, but strong earnings from Alphabet are also helping.
The next, and harder, question is how much further things can go. The first bit of a market move is normally the easiest, as there are plenty of people who can stop selling and start buying - not the case when things are more balanced.
"My view is that the damage to U.S. exceptionalism will be longer lasting, but that it's understandable that there'll be a relief recovery after the U.S. has come back from the brink policy wise," says Jim Reid, global head of macro research at Deutsche Bank.
It's also worth keeping an eye on the dollar, which gives a view of the U.S. on a relative basis.
That's now stopped depreciating, and is stronger on the week against the euro, yen and Swiss franc, though that's sufficiently marginal in the case of the first two that it may have changed by the time you read this.
The dollar certainly isn't halfway back to its position on April 2, let alone recent highs.
Let's wait for that to happen to say things are halfway back to normal.
Chart of the day
Google's mainstay advertising revenue was one of the focuses of Alphabet's results late Thursday and saw an 8.5% rise, above analysts expectations' of a 7.7% increase.
It also helped ease some concerns about whether big tech's ambitious AI build-out will bear fruit, as Alphabet reaffirmed its plans and said AI Overviews, the summaries that appear above traditional hyperlinks to relevant webpages, now have 1.5 billion users per month.
Today's events to watch
* University of Michigan sentiment index April
* Corporate earnings, including from Aon and Colgate
* Trade headlines (of course)
* IMF-World Bank meetings