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Shares in German pills-to-weedkiller conglomerate Bayer jumped 11 per cent on Friday after the group scored a key win in a US appeals court over the labelling of its allegedly carcinogenic herbicide Roundup.

An appeals court in Philadelphia on Thursday ruled that Bayer did not violate US state law when it failed to add a cancer warning to its Roundup products, which uses glyphosate as its active ingredient.

Bayer has been ensnared in complex and costly legal battles over the weedkiller since 2018, fighting cases in multiple US states.

The Leverkusen-based firm, which became embroiled in the glyphosate litigation through its ill-fated $63bn takeover of US rival Monsanto in 2016, is facing damages claims from thousands of US citizens who blame Roundup for giving them cancer and accuse Bayer of failing to warn about the risk. The German conglomerate maintains that the product is safe and says scientific research supports that view.

The Third Circuit Court of Appeals in Philadelphia ruled unanimously on Thursday that federal regulations superseded a Pennsylvania state law, meaning Bayer did not need to place a warning on the pesticide.

The verdict opens the door for Bayer to have the legal issue reviewed by the US Supreme Court, as it is at odds with previous ones by other federal appellate courts.

The court said federal law required health warnings on pesticides to confirm to those required by the Federal Insecticide, Fungicide, and Rodenticide Act rather than state law.

The legal saga was caused by conflicting views of from different authorities on the potential carcinogenic effects of glyphosate. The US Environmental Protection Agency maintains its assessment that the chemical created “no risks of concern to human health when glyphosate is used in accordance with its current label.” But in 2015, the International Agency for Research on Cancer had labelled glyphosate as “probably carcinogenic to humans.”

In 2020, Bayer struck a $10.9bn settlement over a wave of Roundup lawsuits, and set aside another $4.5bn a year later. After losing several court cases, which dragged down the share price heavily, it embarked on a lobbying effort to persuade US states to pass legislation that would cut billions of dollars in liabilities and reduce the legal threat from the litigation saga.

Shares in Bayer were trading at €29.20 on Friday, having risen by 11 per cent in morning trading. The company’s stock is still down more than 40 per cent over the past 12 months, giving it a market valuation of €29bn.

Bayer said in a statement that it was “pleased” with the latest court ruling, adding that the decision created a “circuit split among the federal appellate courts and necessitates a review by the US Supreme Court to settle this important issue of law.”

If the Supreme Court were to share the view of the Philadelphia appeals court, Bayer would be off the hook over bulk of the glyphosate damage claims, according to a person familiar with the matter.

However, it may still decide not to review the case. Previous attempts by the company to get a supreme court ruling on the matter were unsuccessful.

Bayer on Friday said that it stands “fully behind its Roundup products”, arguing that “the weight of scientific evidence and the conclusions of expert regulators worldwide continue to support the safety of glyphosate-based herbicides and that they are not carcinogenic”.

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Asian stocks followed Wall Street’s rally on Friday as fears of a US recession receded, helping to reverse a steep market sell-off earlier this month.

Japan’s benchmark Topix index rose over 2.5 per cent on Friday morning, while the tech-heavy Nikkei 225 surged almost 3 per cent. Shares in Australia, Hong Kong, Taiwan and South Korea also increased.

The moves picked up on momentum in US stocks on Thursday as retail sales data and strong results from Walmart boosted confidence and eased fears that the economy could fall into a recession. The S&P 500 closed 1.6 per cent higher, enough to wipe out the benchmark index’s August losses.

“It’s a combination of stronger US data, stabilisation of the yen and stable geopolitics,” said Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management.

“Underlying Japanese economic data is also looking a bit better, while Korea and Taiwan benefited from stronger US tech.”

Shares in Fujikura, a Japanese maker of optical connectors used in data centres and a beneficiary of the artificial intelligence trend, surged more than 10 per cent to an all-time high. 

Japanese tech bellwethers Renesas Electronics, Disco and Tokyo Electron were all sharply higher after the US Philadelphia Semiconductor Index, which tracks global semiconductor companies, rose 5 per cent on Thursday.

The yen has weakened to ¥148.8 against the dollar after strengthening significantly during the market sell-off earlier in August.

Forex traders in Tokyo said some hedge funds had started rebuilding short term positions in the so-called yen carry trade, in which traders take advantage of Japan’s low interest rates to borrow in yen and buy risky assets. The global sell-off at the beginning of the month was exacerbated by the unwinding of the yen carry trade.

“If there are carry trades coming back, they are not positioning on a six month view, but on a six-hour view,” said a forex analyst in Tokyo.

US retail sales increased 1 per cent in July, the Census Bureau reported on Thursday, the most in a year and a half and far above economists’ forecasts of a 0.3 per cent increase. Meanwhile Walmart raised its profit forecast and reported a 4.2 per cent year-on-year increase in same-store sales at its main US outlets.

The yield on the benchmark 10 year Treasury edged down 0.01 percentage points to 3.90 per cent on Friday, while the rate sensitive 2 year dropped 0.03 percentage points to 4.07. Bond yields fall as their prices rise.

The retail sales figures gave investors more confidence that the US economy would not fall into an imminent recession, said analysts.

“Retail sales were certainly better than expected though it is becoming clear that the US consumer, particularly at the lower income end of the spectrum, is becoming stretched,” said Brian Arcese, portfolio manager at Foord Asset Management.

“The downtick in inflation and the strong retail sales figures have certainly fuelled markets though we would remain cautious. We find better value in either defensive sectors such as utilities and/or regions outside of the US.”

Euro Stoxx 50 futures were up almost 0.3 per cent.

Additional reporting by Gregory Meyer, Harriet Clarfelt and Colby Smith in New York