Photo caption: U.S. President Donald Trump | AFP
Equities rallied with Wall Street on Wednesday after Donald Trump said he had “no intention” of firing the head of the Federal Reserve and that eye-watering tariffs on China would be slashed drastically.
Global markets, already upended by a trade war, were battered further at the start of the week by fears the US president was looking to remove central bank boss Jerome Powell for not cutting interest rates, calling him a “major loser” and “Mr. Too Late”.
Observers warned such a move would have dealt a blow to the Fed’s independence and sparked a crisis of confidence in the world’s top economy, sparking a sell-off of US assets and another global crisis.
However, Trump looked to temper those fears on Tuesday, saying: “I have no intention of firing him.”
“I would like to see him be a little more active in terms of his idea to lower interest rates — it’s a perfect time to lower interest rates,” he said.
“If he doesn’t, is it the end? No.”
The remarks gave a much-needed shot of relief to investors, helped by the president’s comments later indicating a more conciliatory approach to the trade war with China.
Washington has imposed tariffs of 145 per cent on a range of products from China, while Beijing has replied with 125 per cent duties on imports from the United States.
But Trump acknowledged on Tuesday that the US levies were at a “very high” level, and that this will “come down substantially”.
“They will not be anywhere near that number,” he said, but added that “it won’t be zero”.
That came after Treasury Secretary Scott Bessent told a closed-door event in Washington that he expected a de-escalation soon in the United States’ tariff standoff with China, which he said was not sustainable.
White House Press Secretary Karoline Leavitt said later, “The president and the administration are setting the stage for a deal”, noting that “the ball is moving in the right direction”.
Chinese President Xi Jinping also warned on Wednesday that tariffs and trade wars “undermine the legitimate rights and interests of all countries, hurt the multilateral trading system, and impact the world economic order”.
However, foreign ministry spokesman Guo Jiakun said later in the day that “the door for talks is wide open”.
Investors welcomed the developments from Washington with open arms.
Hong Kong surged on the back of a rally in tech firms, including Alibaba and Tencent.
Tokyo, Sydney, Seoul, Wellington, Singapore, Mumbai, Manila, Jakarta and Bangkok also advanced, while London, Paris and Frankfurt were also sharply higher.
Taipei jumped more than four per cent, helped by a seven per cent surge in chip titan TSMC.
However, Shanghai edged down.
Gold, which had hit a record high above $3,500 Tuesday on a rush to safety, retreated to sit around $3,300, while the dollar clawed back some of its recent losses against the pound, euro and yen.
Oil prices were also boosted by more than one per cent, having taken a recent hit by fears over the economic fallout from the tariff standoff.
The gains followed rallies of more than two per cent for all three main indexes in New York.
“While it is still early days, the mood in the market is evidently shifting and what was a strong ‘sell America’ vibe flowing through markets… has in part reversed,” said Chris Weston at Pepperstone.
He added that Trump’s comments on Powell “should go some way to allaying fears of a major policy mistake”.
Investors were unmoved by the International Monetary Fund’s decision to slash its global economic growth outlook by 0.5 percentage points to 2.8 per cent this year, citing the effect of Trump’s tariff policies.
In company news, Japan’s Sumitomo Rubber, which recently bought the Dunlop brand, rose 3.7 per cent after it said it would hike tyre prices for US and Canadian cars and small trucks by up to 25 per cent.
Key figures at 0810 GMT include: Tokyo – Nikkei 225: UP 1.9 percent at 34,868.63 (close), Hong Kong – Hang Seng Index: UP 2.4 percent at 22,072.62 (close), Shanghai – Composite: DOWN 0.1 percent at 3,296.36 (close), London – FTSE 100: UP 1.4 percent at 8,445.62, Euro/dollar: DOWN at $1.1385 from $1.1420 on Tuesday.
Pound/dollar: DOWN $1.3305 at $1.3330, Dollar/yen: UP at 141.85 yen from 141.56 yen, Euro/pound: DOWN at 85.56 pence from 85.67 pence, West Texas Intermediate: UP 1.5 per cent at $64.63 per barrel, Brent North Sea Crude: UP 1.4 per cent at $68.41 per barrel, New York – Dow: UP 2.7 per cent at 39,186.98 (close).
