Asian equities reverse early losses, US Dollar, futures rise on easing shutdown risk

Asian equities retraced early losses and US equity-index futures climbed Friday as signs the US will avoid a government shutdown injected a boost to sentiment.

Shares in Japan retraced early losses while those in Australia also climbed higher. Contracts for US equities advanced early Friday as a stopgap funding bill looked set to pass and avoid a US government shutdown. The S&P 500 dropped 1.4% on Thursday to a six-month low, bringing its three-week rout past 10% — a correction in trader parlance. The Nasdaq 100, also in a correction, fell 1.9%.

Treasuries were steady Friday after rallying in the prior session during a dash to haven assets that lifted gold rose to a record and supported an index of the dollar.

Hong Kong equity futures climbed more than 1% after an index of US-listed Chinese stocks largely sidestepped Thursday’s equity market losses, closing only 0.2% lower.

The retreat from risk had lopped $5 trillion from the US equity benchmark as selloff in megacaps have deepened and rippled across speculative corners from unprofitable tech to the most-shorted shares. The sentiment is a sign of just how much Trump has rattled Wall Street’s once prevalent bull-market faith as uncertainty about tariff wars raise concerns about growth for the US economy.

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 fell with West Texas Intermediate sliding 1.7% to settle below $67 a barrel, following a 2.2% jump on Wednesday that was its biggest gain in almost two weeks. An $8 billion exchange-traded fund tracking junk bonds saw one of its biggest losses in 2025. Bitcoin declined Thursday before rebounding early Friday in Asia.