SYDNEY/ Islamabad, Apr 23, 2025: Stock markets in Asia experienced a much-needed rally on Wednesday, driven by President Donald Trump’s comments stating that he had no intentions of removing the Federal Reserve’s head and hinted at a possible reduction in tariffs for China.
The U.S. dollar strengthened across the board as Trump eased fears over the potential dismissal of Federal Reserve Chair Jerome Powell, a move that had significantly shaken investor confidence in American assets.
Trump also emphasized his desire for a trade agreement with China that would not involve tariffs anywhere near the 145% level but stated that he would dictate the terms of any deal if Beijing failed to engage in discussions.
On Tuesday, Treasury Secretary Scott Bessent suggested that a de-escalation in U.S.-China trade tensions was likely, though negotiations with China had not yet begun and would take time to resolve.
“While it’s still early, the market sentiment is clearly shifting, and the strong ‘sell America’ sentiment that prevailed yesterday is now partially reversing,” said Chris Weston, Head of Research at Pepperstone.
“Investors are adjusting to the reality that the President often takes unpredictable positions, only to retract them later,” he added.
Investors responded by buying back into underperforming stocks, with Japan’s Nikkei index climbing 2.3% in early trading, while South Korea’s main index rose by 1.2%.
The MSCI Asia-Pacific index, excluding Japan, gained 0.3%.
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U.S. markets extended their previous day’s gains, with S&P 500 futures climbing 1.8%, and Nasdaq futures rising 2%.
Positive earnings reports helped fuel sentiment, and even Tesla saw a 5% rebound after hours, despite missing analysts’ expectations.
The dollar also recovered some of its recent losses, rising 0.8% against the Japanese yen to 142.72, bouncing back from a seven-month low of 139.89.
It also gained 0.8% against the Swiss franc to 0.8262, while the euro fell 0.6% to $1.1348.
Longer-term U.S. Treasury yields rallied as Trump’s reversal on Powell reduced concerns about the credibility of U.S. fiscal and monetary policy.
Investors had been concerned that White House pressure to cut interest rates might lead to inflation, especially as Trump’s tariffs push up prices.
Yields on 30-year bonds dropped by 6 basis points to 4.812%, while yields on two-year bonds increased by 3 basis points to 3.83%, flattening the yield curve.
Fed fund futures saw selling as investors reduced their expectations for rate cuts by year-end to around 81 basis points.
Despite ongoing concerns about tariffs, the International Monetary Fund lowered its growth projections for the U.S., China, and several other nations on Tuesday.
Nevertheless, the improvement in risk sentiment helped oil prices recover some of their substantial losses, gaining around 1% on Tuesday.
By early Wednesday, Brent crude rose 67 cents to $68.09 per barrel, while U.S. crude added 64 cents to $64.31 per barrel.
Gold, a safe-haven asset, faced some profit-taking and dropped 0.8% to $3,353 an ounce, after reaching an all-time high of $3,500.
