Asian stocks posted their biggest jump in more than two years as global financial markets rebounded after US President Donald Trump paused most of his sweeping reciprocal tariffs. Treasuries rallied after a tumultuous session.
Shares across the region gained Thursday and equity-index futures for Europe surged more than 8 per cent after the S&P 500 had its best day since the global financial crisis. Yields on 10-year Treasuries fell after a 34 basis point surge in the past three days spurred worries about the stability of the world’s biggest debt market. A gauge of the dollar slipped for a third day and metals halted the longest run of losses in 25 years.
Chinese stocks advanced on expectations for more stimulus after Mr Trump increased levies on the country to 125 per cent. The country’s top leaders are poised to meet Thursday to discuss additional economic measures.
Moves in Asia extended the volatile trading across markets over the past week as investors grappled with the fallout from Mr Trump’s sweeping tariffs and a sudden reversal. Billionaire investors had condemned the levies, economists predicted a recession for the US economy and strategists trimmed their forecasts for stocks as the president sought to remake the world trading order. Wild swings in the US bond market caught Trump’s attention as he pivoted.
“Investors across Asia and beyond are breathing a sigh of relief,” said Frederic Neumann, chief Asia economist at HSBC Holdings. “The postponement of reciprocal tariffs by the US allows more time for negotiations. For export-centered Asian economies this is especially important, given the growth impact steep US tariffs would have had.”
After $10 trillion was wiped off global equity markets and US Treasuries plunged, Mr Trump announced a 90-day pause on the so-called reciprocal tariffs that hit dozens of trading partners after midnight. However, he raised duties on China to 125 per cent. That came after the Asian nation retaliated and said it will raise levies on US goods to 84 per cent.
Countries that were hit with the higher, reciprocal duties that went into effect Wednesday will now be taxed at the earlier 10 per cent baseline rate applied to other nations, with the exception of China, according to a White House official.
While Chinese equities rallied on stimulus expectations, the onshore yuan fell to the weakest level since 2007. Bets on monetary easing measures by the People’s Bank of China to support the economy also weighed on the currency.
The recovery in US stocks came after days of mounting market stress in everything from money markets to credit spreads and a chorus of pleas from Trump’s allies that he pause the implementation of his tariff programme.
“We think Trump blinked, and the probability of a ‘contained damage’ scenario is rising,” said Homin Lee, a senior macro strategist at Lombard Odier Ltd. in Singapore. “We expect Europe and Asia to echo the US relief rally. The punitive tariff rate on China is mostly symbolic at this point.”
Trump’s tariffs: “The rest of the world is now going to de-risk from the United States”
Less than an hour before Mr Trump’s remarks, a $39 billion sale of 10-year notes drew good demand — despite concern by some in the market that his policies might deter foreign buyers. That followed a tepid reaction to a sale of three-year notes on Tuesday, and paints a rosier backdrop for Thursday’s 30-year bond auction.
Mr Trump called the world’s biggest debt market a thing of beauty as his about-face on trade policy sparked huge swings in bonds. Wednesday’s declines for short-dated Treasuries, a popular place where investors parked capital during market turmoil, were amplified as investors pivoted toward the equity rebound.
“There’s still an awful lot of volatility to come,” said Ben Bennet, head of investment strategy for Asia at L&G. “I still think we’re in this correction. So that’s why we would be a seller on strengths.”
In commodities, oil returned to losses as investors grappled with abrupt policy shifts. Gold edged higher. - Bloomberg
