Asian markets surge after signs of deescalation in U.S. policy stance
Markets across Asia rallied on Wednesday, providing relief to investors shaken by recent volatility, after President Donald Trump clarified he had no intention of firing Federal Reserve Chair Jerome Powell and suggested that tariffs on Chinese imports may not stay at extreme levels.
The U.S. dollar rebounded sharply after Trump’s comments, reversing earlier losses triggered by concerns over Federal Reserve independence. The president’s softer tone helped calm investor nerves, particularly following days of speculation that Powell’s job was in jeopardy.
Trump reiterated his openness to a deal with China, stating that while he didn’t expect tariffs to remain at the elevated 145% level, he would dictate the terms if Beijing avoided negotiations.
Earlier, Treasury Secretary Scott Bessent said during a private event that although talks with China had not begun, he was optimistic about eventual deescalation in trade tensions. He warned, however, that the process could be slow and complex.
“While it is still early days, the mood in the market is evidently shifting and what was a strong ‘sell America’ vibe flowing through markets yesterday has in part reversed,” said Chris Weston, head of research at broker Pepperstone.
Investors reacted swiftly to the tone shift. Japan’s Nikkei 225 surged 2.3% in early trading, while South Korea’s main index climbed 1.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.3%.
Wall Street futures also extended their rebound. S&P 500 futures gained 1.8%, and Nasdaq futures were up 2.0%, bolstered by better-than-expected earnings results. Notably, Tesla shares bounced back by 5% in after-hours trading despite a miss on Q1 forecasts.
The dollar strengthened across the board. It rose 0.8% against the Japanese yen, climbing to 142.72 from a seven-month low. It also gained 0.8% against the Swiss franc, reaching 0.8262. The euro fell 0.6% to $1.1348.
U.S. Treasuries also showed signs of stabilizing. The 30-year yield fell six basis points to 4.812%, while the two-year yield rose slightly to 3.83%, narrowing the yield curve. This movement suggested a recalibration of expectations around monetary policy risk.
Meanwhile, Fed fund futures contracts sold off modestly, as traders reduced their bets on rate cuts. Markets are now pricing in around 81 basis points of rate cuts by the end of 2025—down from earlier expectations.
Still, the macroeconomic environment remains fragile. On Tuesday, the International Monetary Fund (IMF)downgraded its global growth forecast, citing risks from U.S.-China trade frictions and slower recoveries in major economies.
Stocks and Dollar Rebound as Trump Steps Back From Powell, Tariff Pressure
Asian markets surge after signs of deescalation in U.S. policy stance
Markets across Asia rallied on Wednesday, providing relief to investors shaken by recent volatility, after President Donald Trump clarified he had no intention of firing Federal Reserve Chair Jerome Powell and suggested that tariffs on Chinese imports may not stay at extreme levels.
The U.S. dollar rebounded sharply after Trump’s comments, reversing earlier losses triggered by concerns over Federal Reserve independence. The president’s softer tone helped calm investor nerves, particularly following days of speculation that Powell’s job was in jeopardy.
Trump reiterated his openness to a deal with China, stating that while he didn’t expect tariffs to remain at the elevated 145% level, he would dictate the terms if Beijing avoided negotiations.
Earlier, Treasury Secretary Scott Bessent said during a private event that although talks with China had not begun, he was optimistic about eventual deescalation in trade tensions. He warned, however, that the process could be slow and complex.
“While it is still early days, the mood in the market is evidently shifting and what was a strong ‘sell America’ vibe flowing through markets yesterday has in part reversed,” said Chris Weston, head of research at broker Pepperstone.
Investors reacted swiftly to the tone shift. Japan’s Nikkei 225 surged 2.3% in early trading, while South Korea’s main index climbed 1.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.3%.
Wall Street futures also extended their rebound. S&P 500 futures gained 1.8%, and Nasdaq futures were up 2.0%, bolstered by better-than-expected earnings results. Notably, Tesla shares bounced back by 5% in after-hours trading despite a miss on Q1 forecasts.
The dollar strengthened across the board. It rose 0.8% against the Japanese yen, climbing to 142.72 from a seven-month low. It also gained 0.8% against the Swiss franc, reaching 0.8262. The euro fell 0.6% to $1.1348.
U.S. Treasuries also showed signs of stabilizing. The 30-year yield fell six basis points to 4.812%, while the two-year yield rose slightly to 3.83%, narrowing the yield curve. This movement suggested a recalibration of expectations around monetary policy risk.
Meanwhile, Fed fund futures contracts sold off modestly, as traders reduced their bets on rate cuts. Markets are now pricing in around 81 basis points of rate cuts by the end of 2025—down from earlier expectations.
Still, the macroeconomic environment remains fragile. On Tuesday, the International Monetary Fund (IMF)downgraded its global growth forecast, citing risks from U.S.-China trade frictions and slower recoveries in major economies.
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