Stocks across Asia rose on Wednesday, while the U.S. dollar showed signs of weakness, as relatively tame U.S. inflation data bolstered hopes for interest rate cuts by the Federal Reserve later this year. Investors remain cautious, however, as they continue to assess whether the worst of the global trade conflicts has passed. U.S. President Donald Trump’s trade war seemed to pause, following a truce in the tariff dispute between the U.S. and China. However, financial markets remain on edge about the long-term outlook. “I’m just a little bit cautious here about chasing the rally in stocks at this level,” said IG analyst Tony Sycamore. “We have to see how things play out with further tariff negotiations, but for now, the worst-case scenario has been priced in.”
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.1%, reflecting a rebound in U.S. stocks that returned to positive territory for the year, erasing losses triggered by Trump’s initial tariff rollout. Hong Kong’s Hang Seng index surged by 1.4%, driven by tech stocks after Chinese e-commerce giant JD.com posted strong earnings. The market’s attention will now turn to earnings from Tencent and Alibaba. Despite the gains in Asia, equity futures suggest a retreat in European markets and a flat day on Wall Street.
U.S. consumer inflation data, which came in softer than expected, provided relief to investors concerned about the inflationary impact of U.S. tariffs. This news had previously led to speculation that the Federal Reserve might not cut interest rates as soon as anticipated. While traders expect inflation to rise as tariffs increase import costs, uncertainty remains regarding the direction of trade negotiations. The global sentiment improved following a recent trade agreement between the U.S. and the U.K., as well as the announcement of a 90-day pause in the trade war between the U.S. and China.
However, there are still lingering uncertainties. Talks between the U.S. and other trading partners, such as India, Japan, and South Korea, are still pending. The Federal Reserve has warned of rising economic uncertainty and indicated it would wait to assess the impact of tariffs before deciding on further rate cuts. The U.S. dollar weakened against the yen and was little changed against the euro. Global asset managers were reported to hold their largest underweight position in the dollar in 19 years, according to a Bank of America survey.
With inflation data behind them, investors are now eyeing U.S. retail sales data for April, set to be released on Thursday. Additionally, talks are planned between Ukraine and Russia, raising hopes for a ceasefire in the ongoing conflict.
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