Asian stocks enjoyed a much-needed rebound on Wednesday after U.S. President Donald Trump said he had no plans to fire the Federal Reserve chairman and hinted at rolling back tariffs on China.
The dollar gained across the board after Trump walked back his threat to fire Fed Chairman Jerome Powell, which severely shook investor confidence in U.S. assets.
Trump also reiterated that he wants a deal with China where tariffs won’t be anywhere near 145%, but added that he would set the terms of the deal if Beijing doesn’t engage in the negotiations.
Earlier on Tuesday, Treasury Secretary Scott Bessant reportedly said he believes U.S.-China trade tensions will ease, but talks with Beijing, which have yet to begin, will be a “tough” negotiation.
“While it’s still early, sentiment is clearly changing and the strong ‘sell US stocks’ sentiment that prevailed in the market yesterday has partially reversed,” said Chris Weston, head of research at brokerage Pepperstone.
“The market is becoming more and more used to the president making off-the-cuff remarks and then changing his position as if it was never a big deal.”
Investors rushed into beaten-down stocks, with Japan’s Nikkei up 2.3% in early trading and South Korea’s main index <;KS11> up 1.2%.
MSCI’s index of Asia-Pacific shares outside Japan rose 0.3%.
Wall Street extended its overnight rebound, with S&P 500 futures up 1.8% and Nasdaq futures up 2.0%. Some upbeat earnings reports boosted sentiment, and even Tesla shares rebounded 5% after hours despite its earnings missing expectations.
The dollar also recovered some of its recent losses, rising 0.8% against the yen to 142.72, off a seven-month low of 139.89.
The dollar rose 0.8% against the Swiss franc to 0.8262, while the euro fell 0.6% against the dollar to 1.1348.
Trump’s shift in tone toward Powell appeared to ease the threat to the U.S. monetary and fiscal credibility, leading to a rise in long-term U.S. Treasury prices. [US/]
Investors have been concerned that White House pressure for rate cuts could fuel inflation, while Trump’s tariffs would push up prices.
The yield on the 30-year bond fell 6 basis points to 4.812%, while the two-year bond yield rose 3 basis points to 3.83%, flattening the yield curve.
Fed funds futures sold off as investors lowered their expectations for rate cuts by the end of the year to about 81 basis points.
The International Monetary Fund on Tuesday slashed its growth forecasts for the United States, China and most countries, with tariffs still weighing on the global economy.
However, a broad improvement in risk sentiment helped oil prices recover some of their hefty losses, rising about % on Tuesday.
In early trading on Wednesday, Brent crude rose a further 67 cents to $68.09 a barrel, while U.S. crude rose 64 cents to $64.31 a barrel.
Safe-haven gold suffered profit-taking, falling 0.8% to $3,353 an ounce, away from its all-time high of $3,500.
