(Bloomberg) — Asian stocks rallied as traders returned to riskier assets amid growing expectations that the U.S. economy will avoid a recession, with the yen set for its worst week since May.

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In Asia, nearly all major stock indexes rose, with one regional index on track for its best weekly performance in over a year. Japanese shares were among the top performers as a weak yen boosted exporters’ profits. The currency lost 1.3 percent against the dollar on Thursday to trade around 149, easing fears of a massive unwinding of carry trades. U.S. stock futures rose slightly.

A slew of U.S. data this week, from inflation to jobless claims to retail sales, has calmed investors and supported the view that the world’s largest economy is heading for a “Goldilocks” scenario in which inflation is contained without growth stalling. Global stock markets have largely recouped last week’s losses as traders feared the Federal Reserve will not cut interest rates quickly enough to prevent a recession.

“Asian equities are currently enjoying an impressive rebound, driven by a renewed sense of ‘perfect balance’ thanks to the latest highly anticipated economic releases,” said Hebe Chen, analyst at IG Markets Ltd. “Japanese equities in particular are continuing their robust recovery and there are no signs of slowing down yet.”

Government bonds in Asia held steady after Thursday’s decline as signs of a robust US economy in recent data releases prompted traders to scale back bets on a massive rate cut in September. They are now pricing in a cut of less than 30 basis points for next month, with a total of 92 basis points expected for the rest of 2024.

As concerns about the U.S. economy eased, stocks continued to recover from last week’s crisis that rocked global markets. The S&P 500 extended its six-day rally to 6.6% on Thursday, its best performance in such a period since November 2022. Walmart Inc., often seen as a growth barometer, rose on solid guidance.

Meanwhile, Wall Street’s “fear indicator” – the VIX – fell by about 15 after rising to 65 last week. This rebound in U.S. stocks after last week’s heavy selling suggests that trend-following quant funds may soon return, which could provide further support to stock prices.

In Japan, stocks were heading for their biggest weekly gain since April 2020, driven by renewed weakness in the yen. This weakness may even entice some hedge funds to re-enter the carry trade that collapsed two weeks ago.

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“Exporters are benefiting from a weak yen and solid U.S. economic data,” said Hiroshi Namioka, chief strategist at T&D Asset Management Co. “Stocks that saw a massive sell-off last month are being bought back as the market calms down from the decline.”

Elsewhere in Asia, the head of China’s central bank promised further measures to support the country’s economic recovery, but warned that “drastic” measures would be needed.

Meanwhile, Australian government bond yields rose on Friday, partly due to the performance of US Treasuries, and the country’s central bank governor said the Reserve Bank of Australia was still a long way from easing monetary policy.

Alibaba Group Holding Ltd. shares rose as optimism about technology stocks outweighed concerns about earnings. JD.com Inc. rose by the most since March after the stock beat net income estimates in results released late Thursday.

Soft landing

U.S. officials are trying to curb inflation by raising interest rates without causing the economy to contract – a scenario known as a “soft landing.” Fed Bank of St. Louis President Alberto Musalem said the time to cut rates was approaching. His counterpart in Atlanta, Raphael Bostic, told the Financial Times he was “open” to a September cut.

“A soft landing is no longer a hope. It’s becoming a reality,” said TradeStation’s David Russell. “These numbers also suggest that recent market volatility wasn’t really a growth scare. It was just normal summer seasonality amplified by moves in the foreign exchange market.”

In commodities, gold was on track for a small weekly gain. Oil eased slightly as the market weighed strong U.S. economic data and a possible attack on Israel by Iran or its proxies against a gloomy Chinese demand outlook.

Important events this week:

• Japanese Tertiary Index, Friday

• Housing starts in the USA, consumer sentiment from the University of Michigan, Friday

• Fed Chairman Austan Goolsbee speaks on Friday

• Construction starts in Canada, Friday

Some of the key market movements:

Shares

• S&P 500 futures rose 0.1% at 1:58 p.m. Tokyo time

• Nikkei 225 futures (OSE) rose 3.1%

• The Japanese Topix rose 2.4 percent

• Australia’s S&P/ASX 200 rose 1%

• Hong Kong’s Hang Seng rose 1.7%

• The Shanghai Composite remained little changed

• Euro Stoxx 50 futures rose 0.2%

• Nasdaq-100 futures rose 0.2 percent

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro was little changed at 1.0982 dollars

• The Japanese yen rose 0.3% to 148.88 per dollar

• The offshore yuan fell 0.2% to 7.1752 per dollar.

• The Australian dollar rose 0.2% to $0.6626

Cryptocurrencies

• Bitcoin rose 2.8% to $58,255.51

• Ether rose 1.8% to $2,596.27

Bonds

• The yield on 10-year government bonds fell one basis point to 3.90%.

• The yield on Japanese 10-year bonds rose four basis points to 0.870%.

• The yield on 10-year Australian bonds rose six basis points to 3.93 percent

Raw materials

• West Texas Intermediate crude oil fell 0.5 percent to $77.78 a barrel

• The spot price of gold fell 0.2 percent to $2,453.05 an ounce.

This story was created with the assistance of Bloomberg Automation.

– With support from Winnie Hsu.

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