Asian markets saw a cautious rebound on Wednesday, buoyed by dovish remarks from Federal Reserve Chair Jerome Powell and strong U.S. bank earnings, though persistent U.S.-China trade tensions curbed broader risk appetite. Powell hinted that the Fed may be nearing the end of its balance sheet reduction and left the door open for further rate cuts, reinforcing market expectations of easing later this year. Traders are now pricing in around 48 basis points of cuts by December.
ANZ economist Tom Kenny noted that the Fed could announce the end of quantitative tightening as early as the October FOMC meeting, forecasting 25-basis-point cuts in both October and December. Investor sentiment was further supported by upbeat quarterly results from major U.S. banks and an improved global growth outlook from the International Monetary Fund (IMF).
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.45%, while Japan’s Nikkei rose 0.8% after a steep decline earlier in the week. U.S. futures also advanced modestly, with Nasdaq and S&P 500 up about 0.1% each.
However, optimism was tempered by escalating trade frictions. President Donald Trump said Washington might terminate certain trade ties with China, while both nations imposed new port fees on shipping companies. The trade conflict intensified after the U.S. introduced 100% tariffs on Chinese goods in response to Beijing’s expanded export restrictions on rare earth materials.
Meanwhile, European futures rose sharply after French Prime Minister Sebastien Lecornu announced a suspension of pension reforms until after the 2027 elections, easing investor worries. The euro edged higher to $1.1611, while the dollar weakened amid Fed rate-cut bets. Safe-haven assets like the yen and Swiss franc gained slightly.
Gold continued its record surge, rising 0.9% to $4,179.80 per ounce, while oil prices slipped marginally, with Brent at $62.33 a barrel and U.S. crude at $58.66.