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(Bloomberg) — US and European equity-index futures rallied with Asian stocks Friday as signs the US will avoid a government shutdown boosted sentiment. 

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Shares in Japan and Australia climbed while the CSI 300 index of mainland China stocks touched the highest level this year, on prospects for more policy support to boost consumption. Futures contracts for US equities advanced as a stopgap funding bill looked set to pass and avoid a US government shutdown. That’s a change in mood after the S&P 500’s Thursday drop brought its three-week rout past 10%, called a correction in trader parlance. The Nasdaq 100, also in a correction, fell 1.9%.

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Treasuries eased up some of the gains from the prior session, when investors dashed to haven assets in a move that lifted gold to a record and supported the dollar. Gains for the greenback extended into Friday, strengthening a gauge of the currency for a third day.

“A short-term rebound is likely,” said Bo Pei, an analyst at US Tiger Securities. “The reasoning is straightforward: extreme market moves are often followed by reversions.”

Avoiding the government close down removes an uncertainty for the markets, already nervous about economic growth in the US due to the tariff war of President Donald Trump. Two months into his presidency, sentiment in Wall Street has turned from optimism to nervousness. The slump has erased $5 trillion from US stocks as market participants pared risk and prompted some investors to move money away from America to markets in Asia, especially China.

“We are very positive on the A-share and H-share markets because we see actually the rotation is there,” William Ma, founder and chief investment officer of GROW Investment Group, said on Bloomberg Television. The firm expects earnings growth to lift mainland and Hong Kong equities, he said.

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Government Shutdown

Congressional Democrats and Republicans have been engaged in a high-stakes game of chicken over Democrats’ insistence that a spending package include some restraints on Elon Musk’s DOGE’s cost-cutting crusade, with Republicans refusing and daring the opposition party to risk blame for a shutdown. Senate Democratic leader Chuck Schumer dropped his threat to block a Republican spending bill, opening the way to avoid a US government shutdown.

In European news, Russian President Vladimir Putin said he wants to discuss a proposed ceasefire in Ukraine with Trump, though he warned that any truce should lead to a long-term resolution of the war. At the same time, the US is tightening sanctions on Russia by restricting payments for energy even as it pursues peace talks.

Investors are the most bullish on Treasuries relative to stocks for at least three years, as Trump’s tariff policies threaten to end the era of US exceptionalism, the Bloomberg Markets Live Pulse survey showed.

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“It’s a very volatile environment and we expect this to continue in the foreseeable future,” Thomas Taw, head of APAC investment strategy, for BlackRock, said on Bloomberg Television. He said equity markets “like Europe and to some extent China,” have emerged as compelling opportunities as US shares have fallen from record highs.

In another sign of a trade-war escalation, Trump threatened to enact a 200% tariff on European wine, champagne and other alcoholic beverages. Later Thursday, Trump said he would not repeal tariffs on steel and aluminum that took effect this week, nor back off plans for sweeping reciprocal tariffs on global trading parters set to start as soon as April 2.

Consumption stocks drove Chinese shares higher on policy hopes and gold miner shares tracked a rise in bullion. Chinese banking stocks advanced as investors positioned for a possible reduction in the reserve ratio requirement, which would free up more funds for lending. CK Hutchison Holdings Ltd. plunged Friday after China’s top office on Hong Kong issues reposted a sharp attack on the conglomerate’s decision to appease Trump by selling its stake in Panama ports. 

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US Recession

The Federal Reserve’s Treasury-based recession model flagged year-ahead recession risk a year ago, and may be proven right if tariff uncertainty continues to hamper economic activity, according to Gina Martin Adams and Michael Casper at Bloomberg Intelligence. 

Historically, a model reading exceeding 30% has accurately predicted recession one year out. And the current probability is 29.76%.

“The Treasury market is flirting with recession signals, helping amplify the risk-off sentiment in equities, while at the same time sending an alternative message of relative calm with relatively tight credit spreads,” they added.

Elsewhere, oil advanced as the US tightened sanctions and gold traded within a whisker of $3,000-an-ounce. 

Key events this week:

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.6% as of 6:45 a.m. London time
• Nasdaq 100 futures rose 0.9%
• The MSCI Asia Pacific Index rose 0.6%, more than any closing gain since March 6
• Hong Kong’s Hang Seng rose 2.3%, more than any closing gain since March 6
• The Shanghai Composite rose 1.7%, more than any closing gain since Jan. 14
• Euro Stoxx 50 futures rose 0.4%

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Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1% to $1.0840
• The Japanese yen slipped 0.6%, more than any closing loss since Feb. 12
• The offshore yuan was little changed at 7.2418 per dollar
• The British pound was little changed at $1.2943

Cryptocurrencies

• Bitcoin rose 1.9% to $81,816.53
• Ether rose 2.7% to $1,892.58

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.29%
• Germany’s 10-year yield declined two basis points to 2.86%
• Britain’s 10-year yield declined four basis points, more than any closing decline since Feb. 25

Commodities

• Spot gold fell 0.1% to $2,984.96 an ounce
• West Texas Intermediate crude rose 1.1% to $67.26 a barrel

This story was produced with the assistance of Bloomberg Automation.

—With assistance from John Cheng and Joanne Wong.

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