Meta and Microsoft power the rebound: Now it’s up to Asia to catch the tailwind

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Robust quarterly numbers from Meta and Microsoft have reignited confidence in U.S. technology leadership and, by extension, the broader equity rebound that began after the April-2 tariff shock. Both firms doubled down on long-term AI capital spending-an outlay that, in my view, remains insulated mainly from tariff pressures. Alphabet signalled the same a week earlier. Yet the glow is not universal: Amazon’s and Apple’s cautious guidance, and Apple’s 4 percent share drop during its earnings call, remind us that much of corporate America still faces margin pressure from higher import costs and a more hesitant global consumer.

Valuation is where the conversation is drifting next. The S&P 500’s forward P/E multiple is back above 20, which strikes me as justified only if the AI investment cycle remains powerful enough to counter slowing growth elsewhere. If wage-sensitive service inflation keeps edging higher later this quarter-something the latest anecdotal surveys hint at-we could quickly learn how thin the market’s margin for error is.

At least Treasuries are behaving in a more familiar manner. Yields firmed on Thursday, providing the dollar with a tailwind and restoring duration’s traditional role as a counterlever to US equity markets. The re-emergence of this textbook bond–equity correlation is a welcome sign, as it suggests that liquidity is filtering back into the plumbing after what felt like a disconcerting “buyers’ strike” earlier in April. In my view, the bond market’s anxiety was never about creditworthiness; it was about clarity. Now that yields have re-anchored, risk budgets across desks can expand a notch, although they remain susceptible to volatility.

Asian equities are likely to take their cue from Wall Street’s renewed risk appetite, particularly in sectors tied to semiconductors and cloud infrastructure. Yet many regional companies remain deeply exposed to the evolving U.S.–China tariff structure. The broader trade backdrop is volatile: while smaller bilateral deals in Southeast Asia appear achievable, negotiations with Beijing could stretch for years. Tech supply chains, therefore, sit at the centre of a still-unresolved contest for both hardware and software dominance.

Complicating matters further, Tokyo’s ‘nuclear option’ enters the conversation after Japan’s finance minister told local television that Tokyo’s vast U.S. Treasury holdings “exist as a card” in its tariff talks with Washington. Few observers expect Japan to sell those bonds, but the comment highlights how deep the geopolitical chessboard has become: reserve assets themselves are becoming a bargaining chip.

That brings us to tomorrow’s U.S. payroll report. Consensus sits around 135,000, marginally below the economy’s replacement rate. Realistically, the April collection window is too early to capture meaningful tariff effects; May and June will tell the fuller story. Still, a material downside miss would prick the current optimism and test how durable investors’ faith in the newfound “U.S. exceptionalism” really is. If the headline print slips toward-or below-six figures (100,000), the Fed may find itself balancing tariff-driven inflation uncertainty against a visibly softer labour market sooner than it would like.

Forex

The street absolutely botched the BoJ read-through. Traders walked in expecting a garden-variety hold and walked out staring at a full-blown dove feast. Ueda’s crew didn’t just keep powder dry-they shredded the old playbook, slashing FY-25 growth to a miserable 0.5% and warning inflation will drift sideways once the tariff fog rolls in. Translation: that long-promised 2% price nirvana just packed its bags for a later decade.

“Judge the outlook without preconceptions” is central-bank code for “our previous forecasts are toast.” Trump’s tariff bazooka blindsided Tokyo: imported sticker shock is fading, rice prices are cooling, and the virtuous wage-price loop has stalled before it ever hit third gear. With headline growth barely above stall speed, defending any more hikes is a kamikaze mission.

Ueda once claimed he had to hike early to avoid a Fed-style scramble later; in reality he just wanted a little altitude so he could cut when the economy tanks. Mission half-accomplished-rates are up, but the cycle’s dead on arrival. Bond desks smell it: JGBs caught an immediate bid, while USDJPY ripped higher on pure Ro/Ro juice-proving yet again that currency prediction is a mug’s game best left to the mugged.

Bottom line: the BoJ has pressed a long, lazy pause. If global trade goes full dumpster fire, they’ll pivot from rate-hike bravado to rate-cut triage in a heartbeat. Until then, expect a drawn-out stare-down-yen traders running four-to-eight-week flow windows, equity hedgers treating every BoJ presser like a live grenade, and macro tourists wondering how they misread the tea leaves so badly, so fast.