A wave of relief washed over Asian financial markets on Wednesday, propelling most major stock indices higher as investors reacted positively to indications that US President Donald Trump would not dismiss Federal Reserve Chair Jerome Powell, coupled with optimistic comments regarding the US-China trade dispute.
Easing fears spark market enthusiasm
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After days of simmering anxiety, markets found comfort in President Trump’s direct statement to reporters on Tuesday where he declared, “I have no intention of firing him,” referring to Powell.
Trump had previously suggested he might take the unprecedented step of removing the Fed chief following the central bank’s pause on further interest rate cuts, rattling investors concerned about the Fed’s independence.
Adding to the improved sentiment were remarks from US Treasury Secretary Scott Bessent.
In a Tuesday speech, Bessent described the ongoing tariff confrontation with China as unsustainable and stated he anticipates a “de-escalation” in the trade war, offering a glimmer of hope for a resolution to the protracted conflict that has weighed heavily on global growth prospects.
Wall Street’s powerful rebound sets the tone
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This shift in tone followed a dramatic turnaround on Wall Street the previous day.
US stocks staged a widespread and powerful rally on Tuesday, decisively reversing sharp losses from the start of the week.
The S&P 500 climbed a robust 2.5%, while the Dow Jones Industrial Average surged 1,016 points, or 2.7%.
The Nasdaq composite also gained a strong 2.7%.
The rally was remarkably broad, with reports indicating that 99% of the stocks within the S&P 500 index advanced, signaling strong conviction returning to the market, at least temporarily.
A suite of better-than-expected profit reports from large US corporations also contributed to the positive momentum.
Asia catches the updraft
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This bullish sentiment carried over into Asian trading on Wednesday.
Japan’s benchmark Nikkei 225 led the gains, jumping 1.7% to 34,797.22 in morning trading.
Australia’s S&P/ASX 200 surged 1.6% to 7,943.00, and South Korea’s Kospi added 1.2% to 2,515.19.
In Hong Kong, the Hang Seng index climbed 1.7% to 21,927.92.
Mainland China’s Shanghai Composite was an exception, remaining little changed, down less than 0.1% at 3,298.33.
Volatility expected to persist amid uncertainty
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Despite the day’s optimism, market strategists caution against assuming a smooth path forward.
Many anticipate continued market volatility, characterized by sharp swings up and down, as investor sentiment ebbs and flows with developments in trade negotiations.
The prevailing view on Wall Street is that unless President Trump secures agreements with trading partners to lower his administration’s tariffs relatively quickly, the risk of the US economy sliding into recession remains significant.
Underscoring these global economic headwinds, the International Monetary Fund (IMF) on Tuesday further downgraded its forecast for global growth this year to 2.8%, down from a previous estimate of 3.3%.
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In company-specific news that offered a contrast to the broader market rally, Tesla reported a significant drop in quarterly profits after Tuesday’s US market close, falling far short of analyst estimates ($409 million vs $1.39 billion a year earlier).
The electric vehicle maker’s results have been negatively impacted by various issues including vandalism and consumer backlash related to CEO Elon Musk’s controversial oversight of cost-cutting measures for the US government.
Musk announced he plans to spend less time involved in Washington affairs and refocus on running Tesla.
Other market movements
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In the bond market, yields on longer-term US Treasuries eased slightly after a recent unsettling climb.
The yield on the benchmark 10-year Treasury note pulled back to 4.39% from 4.42% late Monday.
Oil prices saw gains, with benchmark US crude adding $1.23 to $64.31 a barrel, and Brent crude rising 44 cents to $67.88.
In currency markets, the US dollar weakened against the Japanese yen, trading at 141.85 yen compared to 142.37 yen previously.
The euro strengthened slightly against the dollar, buying $1.1397, up from $1.1379.
