Asian stocks posted modest gains on Wednesday as traders look for a clearer direction amid concerns about US consumer confidence and a late rally in US equities.
Mixed Results in Asian Markets
The MSCI Asia Pacific Index broke its three-day losing streak, with markets in Sydney, Tokyo, and Hong Kong showing positive movement. Meanwhile, the S&P 500 rose by 0.2% on Tuesday, despite fluctuating throughout the session. This marked its longest streak of gains in nearly seven weeks, even as consumer confidence in the US declined.
The yield on 10-year US Treasuries rose slightly to 4.33% in early Asian trading, recovering from a drop in the previous session. The US dollar remained mostly unchanged after ending a four-day rally on Tuesday. Additionally, US copper prices reached a record high.
Weaker US Economic Data and Uncertain Global Outlook
While markets drew some comfort from President Donald Trump’s recent statements about “reciprocal” tariffs due for announcement on April 2, Tuesday’s US economic data heightened concerns about growth in the world’s largest economy. Meanwhile, the rally in Chinese technology stocks has cooled, with the initial excitement around DeepSeek’s AI model fading. This has sent a widely-watched benchmark close to a correction.
Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd., noted, “There doesn’t appear to be anything compelling to suggest a durable directional trade for Asian equity bulls to latch onto at this moment.”
Trump’s Tariff Plans Spark Concerns
Trump is preparing to announce a new round of tariffs, which he describes as “reciprocal” measures in retaliation for levies and trade barriers imposed by other countries, including US allies. These tariffs are expected to be unveiled on April 2. While the announcement will represent a significant expansion of US tariffs, it is expected to be more targeted than the broader global effort that Trump had previously discussed.
In an interview with Newsmax, Trump explained, “I’ll probably be more lenient than reciprocal, because if I was reciprocal, that would be very tough for people.”
Some sources indicate that US tariffs on copper imports could be announced in the coming weeks, ahead of the original deadline for a decision.
Optimism Despite Chinese Stock Pullback
Although Chinese equities have recently pulled back, some Wall Street investors remain optimistic. Morgan Stanley strategists have raised their 2025 year-end target for Chinese stock indexes, noting signs of strong earnings in the fourth quarter. Similarly, Goldman Sachs analysts expect the rally to continue, supported by positive earnings revisions.
Vey-Sern Ling, a managing director at Union Bancaire Privee, stated, “Chinese stocks are taking a breather, I don’t think it’s the end. Valuations are still cheap, the government is supportive of technology and consumption, and innovation is alive and kicking.”
Geopolitical Developments Impact Market Sentiment
Geopolitical news provided a boost to market sentiment after the US announced that Russia and Ukraine had agreed to a ceasefire in the Black Sea. However, the Kremlin emphasized that its participation depended on several preconditions, including sanctions relief. The US also promised to help restore Russia’s access to global markets for agricultural and fertilizer exports, lower maritime insurance costs, and improve access to ports and payment systems.
Concerns Over Consumer Sentiment and Economic Outlook
Recent consumer sentiment surveys have shown growing concerns, with households fearing a resurgence of inflation due to Trump’s tariffs. Companies have warned of higher prices and reduced demand, coinciding with economists’ forecasts that point to the risk of stagflation and a possible recession.
In Tuesday’s consumer confidence report, the percentage of people expecting lower stock prices in the year ahead surged by more than 10 percentage points.
Bret Kenwell from eToro commented, “Sentiment continues to wane among investors, consumers, and businesses as economic concerns and policy uncertainty take their toll. Until there’s more certainty on the tariff and macroeconomic fronts, sentiment and confidence remain vulnerable.”
Commodities Market Update
In commodities, oil prices rose on Wednesday after an industry report showed a reduction in US inventories. Gold prices held steady near record highs, reflecting ongoing market uncertainty.
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