Either way, the data broadly appears to be holding up, and the early indications from the earnings season getting under way are that U.S. corporate profits continue to beat expectations too. The highlights on Thursday were from United Airlines and PepsiCo. Friday's spotlight falls on American Express.
That's the backdrop against which U.S. rates traders are pushing out the expected timing of the first rate cut to October from September. San Francisco Fed President Mary Daly on Thursday signaled two rate cuts this year is a reasonable projection.
The global equity picture was also brightened on Thursday by Taiwan's TSMC, the world's main producer of advanced AI chips. It posted a record quarterly profit and said demand for artificial intelligence was getting stronger. TSMC's domestic shares hit a six-month peak, and its U.S.-listed shares leaped over 4% to a new high.
On the trade front, Trump says a deal with India is "very close" and one with Europe is "possible", while Commerce Secretary Howard Lutnick held a 45-minute phone call with Japan's top trade negotiator Ryosei Akazawa on Thursday.
Treasury Secretary Scott Bessent will travel to Tokyo to meet with Prime Minister Shigeru Ishiba on Friday for a separate event, but trade will surely be discussed, if not formally.
Japan is very much on investors' minds ahead of Sunday's Upper House election which could see the Liberal Democratic Party ruling coalition lose its majority, heightening calls for the government to boost spending and cut taxes.
The prospect of further fiscal slippage in the world's most indebted major economy and complications that would bring for the Bank of Japan have pushed the yen to a three-month low against the dollar and long Japanese Government Bond yields to record highs.
The yen fell on Thursday, swept aside in the dollar's broad rebound, but bonds got a reprieve. The weakness in 20- and 30-year JGBs has added to the downward pressure on long-dated U.S. and European bonds. Sunday's vote will be key to whether the yen retests 150.00 per dollar and whether JGB yields make fresh highs next week.
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