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Upbeat corporate earnings draw interest after the closing bell. Meta Platforms (META) and Microsoft (MSFT) beat earnings estimates, rallying 5.36% and 6.93%, respectively, in after-hours trading.
Recession Risks Rise Despite Easing Inflation
The US economy contracted by 0.3% quarter-on-quarter in Q1 2025 after expanding 2.4% in Q4 2024. Rising risks of a US recession impacted risk sentiment. Labor market data added to the negative sentiment. The ADP reported a 62k rise in employment in April, down from 147k in March.
However, inflation showed signs of easing. The Core PCE Price Index rose 2.6% year-on-year in April, down from 3% in March, boosting bets on multiple Fed rate cuts. Expectations of a more dovish Fed rate path countered recession jitters, supporting a market recovery. Robust personal spending early in Q2 2025 further supported the appetite for risk assets, helping offset broader recession concerns.
Hopes for a more dovish Fed rate path and upbeat earnings set a cautiously optimistic tone for the Asian session on Thursday, May 1.
Bank of Japan Shifts Tone Amid Trade Headwinds
On May 1, the Bank of Japan maintained interest rates at 0.5%, aligned with market expectations. However, Trump’s tariff policies forced the BoJ to lower its growth and inflation forecasts, signaling a less hawkish policy stance. Officials noted that a weakening economy could weigh on underlying inflation.
The Yen tumbled as investors digested the BoJ statement, with USD/JPY rallying 0.86% to 144.272 during the Asian session.
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