Asian stock markets were set for a downbeat start on Friday, with futures indicating declines across key regional bourses, largely mirroring a weak session on Wall Street.

Investor caution is prevalent as global markets await crucial US jobs data, which is expected to provide significant insights into the Federal Reserve’s potential path for interest rate cuts.

Adding to the complex market picture, Indian benchmarks like the Sensex are anticipated to open on a tepid note ahead of a pivotal monetary policy announcement from the Reserve Bank of India (RBI).

The anticipated weakness in Asia follows a lackluster performance in US trading, where the S&P 500 fell by 0.5% and the tech-heavy Nasdaq 100 declined by 0.8% on Thursday.

US Treasuries also experienced a sell-off, though contracts for US stocks were mostly flat in early Asian trading on Friday. Equity-index futures for both Japanese and Australian shares pointed to a lower open.

A significant factor weighing on US benchmarks on Thursday was a dramatic 14% slump in Tesla Inc.’s shares.

This sharp decline came after President Donald Trump proposed ending Elon Musk’s government contracts and subsidies, a retaliatory move following Musk’s public criticism of the Republican’s tax-policy bill.

Musk, a former adviser to Trump, further escalated the confrontation by stating he would cease using SpaceX’s Dragon spacecraft for government missions and called for Trump’s impeachment.

This high-profile dispute overshadowed earlier, more positive news that President Trump and China’s President Xi Jinping had agreed to further trade talks.

Trump had announced that these discussions would commence shortly at a yet-to-be-determined location, aiming to resolve ongoing disputes over tariffs and rare earth minerals.

However, the subsequent “Trump-Musk war of words” quickly soured market sentiment.

“The call with Xi is arguably the factor that could have had a lasting impact on markets,” Chris Weston, head of research at Pepperstone Group, wrote in a note.

Instead, Weston observed, the call offered “nothing tangible for traders to work with and attention has quickly pushed back to the Trump-Musk war of words.”

Despite the broader cautious mood, a gauge of US-listed Chinese stocks managed to rise 0.5% on Thursday, and Hong Kong equity futures were fractionally higher in early Friday trading, bucking the general trend.

Indian markets brace for RBI policy amid tepid global cues

Indian stock market benchmark indices, the Sensex and Nifty 50, are likely to open on a subdued note this Friday.

This cautious outlook is influenced by mixed global market cues and, more significantly, the anticipation surrounding the RBI’s monetary policy decision, which Governor Sanjay Malhotra is set to announce today.

Trends on Gift Nifty also indicate a tepid start for the Indian benchmark index, with Gift Nifty trading around the 24,841 level, a discount of nearly 20 points from the Nifty futures’ previous close.

The RBI’s Monetary Policy Committee (MPC) is widely expected to deliver a 25 basis points (bps) cut in the repo rate, which would bring it down to 5.75% from the current 6%.

This potential easing comes after the domestic equity market indices ended over half a percent higher each on Thursday.

The Sensex had gained 443.79 points, or 0.55%, to close at 81,442.04, while the Nifty 50 settled 130.70 points, or 0.53%, higher at 24,750.90.

US jobs data, currency dynamics, and corporate news in focus

The 10-year US Treasury yield rose by approximately four basis points to 4.39%, partly reversing a rally from the prior session.

Meanwhile, an index tracking the US dollar fell towards its lowest level since July 2023, indicating some weakness in the greenback.

Later on Friday, all eyes will be on the US nonfarm payrolls report.

Economists surveyed by Bloomberg anticipate that payroll growth likely decelerated to 125,000 last month, following a second consecutive month of handily beating expectations in April.

The market reaction to this data will be critical.

“Anything below the 100,000 mark could reignite recession fears while a stronger-than-expected print could perversely be negative for risk assets as it would likely put upward pressure on yields,” commented Julien Lafargue, Chief Market Strategist at Barclays Private Bank.

In other US economic policy news, the Treasury Department released its semiannual foreign-exchange report on Thursday.

While declining to label any country a currency manipulator, the report specifically singled out China for “its lack of transparency.”

The last time the Treasury designated a country as a manipulator was during Trump’s first term in 2019 when China received the label, only for it to be dropped five months later as a bilateral trade deal was negotiated.

In corporate developments from Asia, Chinese ride-hailing giant Didi Global Inc. reported a return to profit in the March quarter, according to results released on Thursday.

This positive news comes as the company reportedly gears up for a potential Hong Kong market debut. Elsewhere in China, officials summoned the heads of major electric vehicle makers, including BYD Co., to Beijing earlier this week.

According to reports citing people familiar with the matter, these meetings were aimed at addressing concerns about the long-running price war in the EV sector.

Commodity markets were showing muted moves. Gold edged higher in early Friday trading after a 0.6% decline on Thursday.

West Texas Intermediate (WTI), the US oil price benchmark, was slightly lower on Friday following a gain in the prior session.

Across Asia, a series of economic data releases are scheduled for Friday beyond the Indian interest rate decision.

These include household spending figures from Japan and inflation data for Thailand and Vietnam, all of which will provide further insights into the region’s economic health.

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President Donald Trump’s ambitious tax and spending bill, a cornerstone of his administration’s economic agenda, is facing a wave of skepticism and concern from prominent economists and even former allies like Elon Musk.

As the legislation, which narrowly passed the House in May, heads to the Senate, its potential to significantly increase the national debt and widen the US budget deficit is under intense scrutiny.

Elon Musk, who recently departed his role as a “special government employee” in Trump’s White House, has become a vocal critic of the GOP spending bill.

In a pointed post on X earlier this week, Musk described the legislation as a “massive, outrageous, pork-filled Congressional spending bill” and a “disgusting abomination.”

His primary contention is that the bill, contrary to efforts to slash government spending, will exacerbate the budget deficit. President Trump responded to Musk’s critique, calling it “disappointing.”

The bill in question proposes to reduce tax rates for lower-income workers, particularly those earning less than $107,200, and aims to eliminate taxes on tips, social security, and overtime.

However, it also includes cuts to social programs such as Medicaid and SNAP (Supplemental Nutrition Assistance Program) benefits, which provide food assistance to low-income Americans.

Like Musk, many investors and economists are expressing apprehension that these measures will cause the national debt to balloon.

The non-partisan Congressional Budget Office (CBO) stated this week that the bill would likely grow the deficit by $2.4 trillion over the next decade.

President Trump and his allies have countered these concerns, arguing that the economic growth spurred by lower taxes would ultimately boost government revenue.

Expert dissections: a spectrum of economic concerns

A diverse group of leading economists has weighed in on the bill’s potential ramifications, offering analyses that largely echo the fiscal concerns:

Phillip L. Swagel, Director of the Congressional Budget Office:

Despite the proposed tax relief for lower earners, Swagel, in a May 20 letter, outlined a negative impact on poorer Americans.

“CBO estimates that household resources would decrease by an amount equal to about 2 percent of income in the lowest decile (tenth) of the income distribution in 2027 and 4 percent in 2033, mainly as a result of losses of in-kind transfers, such as Medicaid and SNAP,” he wrote.

Conversely, Swagel noted, “resources would increase by an amount equal to 4 percent for households in the highest decile in 2027 and 2 percent in 2033, mainly because of reductions in the taxes they owe.”

This suggests a regressive impact, disproportionately benefiting higher-income households.

William McBride, Chief Economist at the Tax Foundation:

McBride and his colleagues at the non-partisan Tax Foundation, in a May 23 report, acknowledged that the bill could support economic growth but concluded it wouldn’t be sufficient to offset the revenue loss from the tax cuts.

“Our preliminary analysis finds the tax provisions included in the House-passed bill would increase long-run GDP by 0.8 percent,” the report stated.

However, it also projected that “The bill’s tax and spending changes would increase the 10-year budget deficit by $2.6 trillion from 2025 through 2034 on a conventional basis before added interest costs.

On a dynamic basis, accounting for economic growth, the deficit would increase by $1.7 trillion over ten years before interest costs.”

The report further detailed that “The bill’s tax provisions alone would reduce federal tax revenue by $4.1 trillion from 2025 through 2034 on a conventional basis before added interest costs. On a dynamic basis, accounting for economic growth, the revenue reduction would fall by nearly 22 percent to $3.2 trillion over 10 years before added interest costs.”

Six Nobel laureates:

In a joint letter dated June 2, six Nobel Prize-winning economists—Daron Acemoglu, Simon Johnson, Peter Diamond, Paul Krugman, Oliver Hart, and Joseph Stiglitz—warned that the bill would worsen wealth inequality in the US.

“The combination of cuts to key safety net programs like Medicaid and SNAP and tax cuts disproportionately benefiting higher-income households means that the House budget constitutes an extremely large upward redistribution of income,” they wrote.

“Given how much this bill adds to the US debt, it is shocking that it still imposes absolute losses on the bottom 40% of US households.”

The laureates concluded, “The House bill addresses none of the nation’s key economic challenges usefully and exacerbates many of them.”

Ken Rogoff, Professor of Economics at Harvard University:

Rogoff, a former chief economist at the International Monetary Fund (IMF), expressed skepticism about the bill’s growth-boosting claims in a piece for Project Syndicate this week.

“Trump and his acolytes argue that his ‘big, beautiful bill’ will supercharge economic growth, generating enough revenue to make up for sweeping tax cuts. But history offers little support for such claims,” he wrote.

Rogoff pointed out that “While both Democratic-led spending sprees and Republican-backed tax cuts have fueled the growth of US debt over the past two decades, tax reductions have accounted for the lion’s share of the increase. Moreover, the notion that tax cuts pay for themselves was already discredited in the 1980s, when President Ronald Reagan’s tax cuts led to soaring deficits rather than self-sustaining growth.”

He added a cautionary note about the potential consequences: “Will America’s rising debt ultimately trigger a full-blown crisis? Perhaps, but a continued upward drift in long-term interest rates is more likely.”

Desmond Lachman, Senior Fellow at the American Enterprise Institute:

Lachman, another former IMF official now with the conservative-leaning think tank, warned in a June 4 post that rising bond yields, a declining dollar, and appreciating gold prices could be harbingers of an economic crisis precipitated by Trump-driven policy volatility.

He argued that Trump’s tax bill is heightening investors’ fears due to its inflationary implications.

Furthermore, Lachman highlighted a specific clause in the bill that he believes undermines confidence in the reliability of returns on US Treasuries: “That bill includes a clause that has to be sending shivers down foreign investors’ spines.

According to Section 899, the US Treasury can impose additional taxes of up to 20 percent on income earned by foreign entities from countries that enact taxes deemed ‘unfair’ to US interests.”

This provision, he suggests, could deter foreign investment in US debt.

As the bill moves to the Senate, these expert analyses and critiques will undoubtedly play a significant role in shaping the ensuing debate over its economic merits and fiscal sustainability.

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The public unravelling of the alliance between Donald Trump and Elon Musk — once seen as one of the most powerful relationships in American business and politics — has rapidly turned into a high-stakes standoff with far-reaching consequences.

In a dramatic turn Thursday, Trump threatened to cancel federal contracts with Musk’s companies, jeopardizing the businessman’s vast government-dependent empire, including SpaceX and Tesla.

Meanwhile, Musk’s vocal opposition to Trump’s cornerstone legislative package has created a fissure within the Republican Party just as the bill moves through Congress.

As both men dig in, the political and financial stakes are mounting — not just for Musk and Trump, but for the broader markets, government projects and the Republican Party’s legislative agenda.

Musk’s SpaceX risks losing billions in federal contracts

Elon Musk, who heads Tesla, SpaceX and artificial intelligence startup xAI, has long been a favoured partner of the US government.

But that relationship is under threat.

On Thursday, after days of criticism from Musk, Trump said he would consider canceling billions of dollars in government contracts with Musk’s companies.

SpaceX in particular has enjoyed deep ties with NASA, the Pentagon and intelligence agencies.

It currently holds multibillion-dollar contracts to ferry astronauts, launch national-security payloads, and build vehicles for future moon missions.

Just two months ago, it won a $5.9 billion Pentagon deal and is part of NASA’s $4 billion program for moon landings.

SpaceX has also secured deals with US intelligence agencies, including a $1.8 billion classified contract with the National Reconnaissance Office, which oversees the country’s surveillance satellites.

Musk had appeared poised to land even more lucrative government work under the Trump administration.

SpaceX, along with two partner firms, is vying for a role in the president’s proposed missile-defence initiative, dubbed the Golden Dome for America.

But with Trump now turning on the tech mogul, future contracts and ongoing collaborations hang in the balance.

“An administration official said Musk will find it extremely difficult to find a sympathetic voice in the Trump administration now,” The Wall Street Journal said in a report.

Tesla reels from market turmoil and regulatory threats

Tesla’s stock plummeted on Thursday, wiping out $152.4 billion in market value — its worst one-day decline ever following the public spat.

The drop compounds recent investor unease as Tesla’s sales weaken in the US and Europe.

Tesla’s plan to deploy a nationwide fleet of self-driving cars hinges on regulatory changes at the federal level — a shift Elon Musk has been actively lobbying for.

At present, individual states hold the authority to decide whether autonomous vehicles can operate on their roads.

Earlier this year, Transportation Secretary Sean Duffy visited Tesla’s factory in Austin and expressed support for a unified federal approach to self-driving rules.

But after Musk’s criticism of Trump’s bill, that support could falter.

Adding to Tesla’s vulnerability is its reliance on emissions credits.

The automaker sells these to other manufacturers to help them comply with environmental regulations.

Those credits are a significant source of revenue, but Trump-aligned lawmakers recently moved to kill California’s stricter emissions standards — a shift that could undercut EV adoption and Tesla’s bottom line.

Trump’s political gamble could backfire

Trump, meanwhile, is facing mounting pressure of his own.

His entire legislative agenda — a sweeping bill combining tax cuts, border security funding and social program reductions — is hanging by a thread.

It passed the House by a single vote, and any defection from Republicans in the next round could sink it.

Musk’s attacks, calling the bill a “disgusting abomination” and warning of a $2.5 trillion deficit increase, have added fuel to conservative critics’ concerns.

The entrepreneur has suggested he could support primary challengers to pro-bill Republicans and hinted he might form a new political party — a notion that gained traction with his massive online following.

Only three House Republicans have publicly backed Musk’s position so far, but even a few more could doom the bill’s chances.

Representative David Schweikert of Arizona, a fiscal hawk who missed the first vote, told The Wall Street Journal that that he wants “multiple changes” to the bill before he will support it.

“Is this the moment where Republicans and everyone in the country start to understand the threat and the scale of financing this debt?” said Schweikert, who is seen as vulnerable in the midterm elections next year.

On the debt, he said: “Musk is absolutely right.”

Still, most Republicans remain in Trump’s corner, viewing Musk’s attacks as potentially harmful to their cause.

A senior Republican on the Financial Services Committee warned that the feud could have lingering effects on Musk’s standing in Washington.

GOP fractures threaten midterm prospects

Beyond the immediate legislative fight, the Trump-Musk rupture could reshape the 2026 midterms.

The GOP holds a fragile House majority, and Trump had counted on Musk’s online army to galvanize support.

A lasting break could cost Republicans key districts and stoke internal divisions.

Musk’s musings about forming a new party underscore the depth of the split.

On Thursday, he asked his 220.5 million followers on X whether they would support a new political party.

By the end of the day, more than 80% of 3.5 million respondents had voted yes.

While such online polls are far from binding, they reflect Musk’s growing willingness to challenge the political establishment — even one he helped bolster in the last election, when he donated more than $250 million to support Trump.

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European stock markets exhibited a muted and cautious start to Friday’s trading session, with the pan-European Stoxx 600 index hovering near flat territory.

Investors appeared reluctant to place significant bets ahead of the release of crucial US jobs data, while persistent trade tensions and a high-profile spat between US President Donald Trump and Elon Musk added to the uncertain market atmosphere.

As of 8:17 a.m. London time, the Stoxx Europe 600 index was up a mere 0.02%, reflecting a general holding pattern after three consecutive positive sessions.

Earlier readings around 0709 GMT also showed the pan-European STOXX 600 holding its ground at 551.9 points.

Despite the day’s tentative mood, the benchmark index remained on track for a second consecutive weekly gain, provided the current momentum holds.

Performance across national bourses was mixed.

The UK’s FTSE 100 led the way with a modest 0.15% rise, supported by an advance in oil and gas stocks amid higher crude prices.

However, mainland European markets showed more weakness, with Germany’s DAX and France’s CAC 40 down by 0.2% and 0.1%, respectively.

US jobs data and trade jitters dominate investor focus

The primary focus for global investors on Friday is the monthly US non-farm payrolls report.

This key economic indicator is expected to heavily influence market sentiment and help investors gauge how the Federal Reserve might navigate the current uncertain trade environment and its potential impact on monetary policy.

Economists are anticipating a contraction in US jobs from the previous month.

Adding to the cautious sentiment are ongoing trade tensions.

US President Donald Trump escalated these concerns earlier this week by announcing a doubling of tariffs on steel and aluminum imports.

Following this, the Trump administration reportedly requested countries to submit their best trade offers by Wednesday, but markets have yet to see any concrete outcomes from these demands, leaving a cloud of uncertainty.

In a separate but related development, President Trump spoke with his Chinese counterpart Xi Jinping on Thursday.

Trump described the 90-minute call as “very good” and “almost entirely” focused on trade, though specific details or breakthroughs were not immediately forthcoming.

ECB signals easing cycle nearing end; Trump-Musk feud rattles tech

The European Central Bank’s (ECB) anticipated interest rate cut on Thursday, while delivered as expected, was somewhat overshadowed by signals from ECB President Christine Lagarde that the central bank is approaching the end of its current easing cycle.

This guidance prompted investors to scale back their expectations for further significant rate cuts, contributing to a more measured market reaction.

Regional stocks had ended Thursday’s session higher following the ECB’s widely anticipated move to trim interest rates.

Adding another layer of intrigue and potential volatility, the public dispute between US President Donald Trump and Elon Musk, the world’s richest person, escalated overnight.

What began with Musk publicly criticizing Trump’s spending bill has devolved into a “full-on row,” with the president threatening to withdraw billions of dollars’ worth of government contracts from Musk’s companies, including Tesla and SpaceX.

Musk, in turn, reportedly claimed Trump would not have secured a second term without his campaign input and stated that SpaceX would immediately decommission its Dragon spacecraft due to Trump’s threats to cut funding.

The fallout from this feud was significant, with Tesla reportedly seeing $152 billion wiped off its market capitalization – the biggest hit to its valuation ever.

In specific stock movements, shares of sportswear retailers Adidas and Puma slipped nearly 1% and 1.5%, respectively.

This decline followed a move by US peer Lululemon Athletica, which cut its annual profit forecast, raising concerns about the broader athletic apparel sector.

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Could the very public clash between US President Donald Trump and Tesla CEO Elon Musk already be heading toward a truce?

On Thursday, Musk indicated he was ready to cool tensions with Trump, following a volatile day in which he called for the president’s impeachment and implied Trump was hiding files related to Jeffrey Epstein.

The remarks came after Musk’s scathing attacks on the Republican tax bill drew ire from the White House, culminating in Trump’s threat to revoke billions in government contracts for Musk’s companies, Tesla and SpaceX.

According to Politico, White House officials have also scheduled a call with Musk for Friday in hopes of brokering peace.

As of late Thursday night, the White House had not issued an official comment on the matter.

Musk walks back aggressive stance as markets punish Tesla

Musk’s decision to escalate his rhetoric against Trump had swift financial consequences.

Tesla shares plunged 14% on Thursday — their largest single-day drop in history — wiping out $152 billion in market value and slashing Musk’s personal fortune by $34 billion.

In an apparent effort to reduce tensions, Musk reversed a prior post where he had announced SpaceX would stop using its Dragon spacecraft.

Responding to a user with only 200 followers on X who advised both men to “cool off,” Musk replied, “Good advice. Ok, we won’t decommission Dragon.”

He also responded positively to hedge fund billionaire Bill Ackman, who urged the two to reconcile “for the benefit of our great country.”

Musk’s reply: “You’re not wrong.”

Source: X

Trump shrugs off feud, highlights polling and legislative agenda

Additionally, despite the public spat, President Trump appeared unfazed in a brief phone interview with Politico.

“Oh, it’s okay,” he said when asked about the feud with Musk.

“It’s going very well, never done better.” He quickly pivoted to touting high favourability ratings before ending the call.

Privately, however, White House aides were reportedly concerned about the feud distracting from legislative priorities.

According to Politico, officials persuaded Trump to scale back his attacks on Musk and focus on the administration’s sweeping tax bill — a centrepiece of the president’s second-term agenda that narrowly passed the House and is now in the Senate.

The president appeared to heed that advice in a Truth Social post, writing, “I don’t mind Elon turning against me, but he should have done so months ago.”

He went on to defend the legislation, calling it “one of the Greatest Bills ever presented to Congress” and signed off with his trademark, “MAKE AMERICA GREAT AGAIN!”

Republican lawmakers caught between a rock and a hard place

The clash has forced Republican lawmakers into an uncomfortable position.

Musk, a significant financial contributor to the party and owner of the influential platform X, has become an increasingly vital figure in conservative politics.

Trump, meanwhile, remains the Republican Party’s dominant force.

House Speaker Mike Johnson attempted to strike a conciliatory note, telling reporters that “policy differences shouldn’t be personal” and referring to Musk as a friend.

Behind the scenes, party operatives with ties to both men were reportedly working to calm the waters.

A volatile alliance shows its limits

The day’s events marked a dramatic turning point in the once-close relationship between Trump and Musk, who had worked together in recent months to align tech innovation with federal policy.

Musk’s recent criticisms of government spending, particularly around the tax bill, triggered a rare open rebellion against Trump, one that quickly spiralled into mutual threats and financial damage.

Whether the cooling tone holds or merely sets the stage for another round of political theatre remains to be seen.

For now, both men seem to recognize the high costs of continued escalation.

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