Stocks, dollar rise in price after Trump's retreat from statements about the Federal Reserve
Kyiv • UNN
European stocks recovered after Trump's statements about the head of the Federal Reserve and a possible reduction in duties for China. The STOXX 600 index rose by 1.7% amid corporate reports.
European stocks recovered in price in trading on Wednesday, amid investors getting some relief from US President Donald Trump's statement that he does not plan to fire the head of the Federal Reserve System, and a hint of lower duties for China, UNN writes with reference to Reuters.
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The dollar initially jumped after Trump abandoned his threats to fire Fed Chairman Jerome Powell, which undermined investors' confidence in American assets, although most of these gains were nullified with the start of trading in Europe.
Trump also reiterated that he wants to reach an agreement with China, under which duties will not approach 145%, adding that he will set the terms of the agreement if Beijing does not enter into negotiations. US Treasury Secretary Scott Bessent reportedly said on Tuesday that he believes there will be a de-escalation of trade tensions between the US and China, but negotiations with Beijing have not yet begun and will be "tiring."
"Although it is too early to talk about it, the mood in the market is obviously changing, and what was a strong mood of "selling America" in the markets yesterday has partially changed," said Chris Weston, head of research at Pepperstone brokerage.
"Markets are increasingly getting used to the fact that the president "shoots from the hip" and then changes his position, as if it was never a big problem," he said.
The European STOXX 600 index rose by 1.7% in a busy day for profits, with a focus on the German software developer SAP and BE Semiconductor Industries - a supplier to the microchip industry, while a study of business activity in Germany showed that the private sector has slipped back into recession.
A sharp jump in Asian markets overnight led to the MSCI's broadest index of Asia-Pacific stocks outside of Japan rising nearly 2%, while US stock futures rose 1.7-2%, suggesting a rally on Wall Street later.
The mood was already supported by some optimistic profits, and Tesla jumped 5% after the bell, despite not meeting forecasts.
Tesla CEO Elon Musk said in a telephone conversation with analysts that he will significantly reduce his involvement in the work in the US Department of Government Efficiency (DOGE) from next month, in order to focus more on his numerous companies.
The dollar rose 1.1% against the Japanese yen, which served as the main haven for those who were getting rid of American assets, before rolling back and showing an increase of 0.1% to 141.82, which is slightly higher than the seven-month lows below 140.
The euro fell by 0.3% to $1.1383, while the pound fell by 0.2% to $1.331.
Long-term treasury bonds rose in price, amid the fact that Trump's reversal on Powell seemed to weaken the threat to the monetary and fiscal reputation of the United States.
Investors were concerned that White House pressure to lower interest rates could lead to rising inflation, just as Trump's tariffs are raising prices.
However, the overall picture has not yet changed enough to encourage investors to start returning to American assets, according to Jefferies strategist Mohit Kumar.
"Volatility is likely to persist, and we will take advantage of any sales to build up positions in Europe and Asia. It makes sense to remain modest and flexible in these markets, focus on the long-term outlook and trade around these headline lines," he said.
The yield on 30-year bonds fell by 7.5 basis points to 4.804%, while the yield on two-year bonds rose by 3 basis points to 3.82%, amid the fact that investors attribute less probability to any immediate rate cut.
Tariffs are expected to harm the global economy, as the International Monetary Fund on Tuesday lowered its growth forecasts for the United States, China and most countries.
However, the overall improvement in risk sentiment helped oil prices recover some of their significant losses. Brent oil rose by 1.6% to $68.50 per barrel.
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Gold, which is a safe-haven asset, faced profit-taking and fell by 2% to $3,314 per ounce, down from a historic high of $3,500.
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