World stocks headed for a second straight week of gains on Friday and the dollar for its first weekly rise in more than a month as investors took comfort from signs the U.S. and China were prepared to pull back from their trade war.
Europe's benchmark STOXX index rose 0.3% on hopes of an easing of trade tensions, buoyed also by a range of positive corporate earnings reports from Finnish forestry group Stora Enso to French jet engine maker Safran.
The dollar, which has taken a beating through a volatile few weeks of tariff announcements, reversals and a flight out of U.S. assets, found a footing around $1.1330 per euro and 143.4 Japanese yen. [FRX/]
"The peak in terms of threatened tariff rates is likely behind us," said Eli Lee, chief investment strategist at Bank of Singapore.
"In terms of the U.S.-China standoff, both sides have indicated they would not raise rates beyond current levels."
Tit-for-tat tariffs that began with U.S. President Donald Trump's announcement of hefty import levies on April 2 had threatened to stall trade between the world's two biggest economies and sparked fears of a slowdown in global growth.
This week, the U.S. shifted its tone and said the situation was unsustainable, and China is considering exempting some U.S. imports from its 125% tariffs in the biggest sign yet of Beijing's concerns about the economic fallout.
UNEASY CALM
In Hong Kong, the Hang Seng rose 1% and there were small rises for mainland China's Shanghai Composite and blue chip CSI300. [.HK]
In Japan, the Nikkei was up 1.8% on Friday and has regained all its losses since Trump's announcement of the highest U.S. tariffs in 100 years - levies he largely suspended, except for China and a baseline tariff of 10%.
"There is probably a feeling from market participants that they have regained some 'control' on the U.S. government, and can somehow force a more friendly stance on key topics," said ING currency strategist Francesco Pesole in a note to clients.
"Investors will be seeking confirmation of the more optimistic stance on U.S. assets to justify further dollar gains."
The U.S. dollar index was up 0.2% for the week at 99.623.
WARNING SIGNS
Despite the positive mood, there were also plenty of warning signs that markets' surface calm may not last long.
Overnight Procter & Gamble, PepsiCo, Chipotle Mexican Grill and American Airlines all cut or withdrew forecasts due to elevated uncertainty among consumers.
Gold was firm at $3,296 an ounce and analysts at Phillip Securities in Singapore noted the Gold/S&P 500 ratio, a gauge of investors' gloom, was at its highest since the pandemic-driven bear market of 2020.
Pressure eased on the U.S. Treasury market which was sold off heavily as Trump's tariff barrage rattled confidence in U.S. leadership and assets, with 10-year yields steady at 4.30% on Friday. Japanese yields rose along the curve after a hotter-than-expected Tokyo inflation reading.
(Reporting by Tom Westbrook; Editing by Saad Sayeed and Kate Mayberry)
