Stocks, dollar rebound in Asia as Trump steps back

SYDNEY: Stock markets were enjoying a much-needed relief rally in Asia on Wednesday after President Donald Trump said he had no plans to fire the head of the Federal Reserve, and hinted at lower tariffs for China.

The dollar jumped across the board after Trump walked back on threats to dismiss Fed Chair Jerome Powell, which had badly shaken investor confidence in U.S. assets.

Trump also reiterated he wanted to do a deal with China where tariffs would not be anywhere near 145%, but added that he would set the terms of a deal if Beijing did not enter talks.

Earlier on Tuesday, Treasury Secretary Scott Bessent had been reported saying he believes there will be a de-escalation in U.S.-China trade tensions, but negotiations with Beijing have not yet started and would be a "slog".

"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 yesterday has in part reversed," said Chris Weston, head of research at broker Pepperstone.

"Markets are becoming ever more conditioned to the President shooting from the hip and then reversing the stance like it was never a big issue."

Investors reacted by buying back into beaten-down stocks and Japan's Nikkei .N225 jumped 2.3% in early trade, while South Korea's main index <;KS11> rose 1.2%.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.3%.

Wall Street extended an overnight bounce as S&P 500 futures ESc1 climbed 1.8% and Nasdaq futures NQc1 2.0%. Sentiment had been helped by some upbeat earnings results, and even TeslaTSLA.O rebounded 5% after the bell despite missing forecasts.

The dollar also recouped a little of its recent steep losses, rising 0.8% on the Japanese yen to 142.72 JPY=EBS and away from a seven-month low of 139.89.

The dollar rose 0.8% on the Swiss franc to 0.8262 CHF=EBS, while the euro slipped 0.6% to $1.1348 EUR=EBS.

Longer-dated Treasuries rallied as Trump's reversal on Powell seemed to ease the threat to U.S. monetary and fiscal credibility. US/

Investors have been worried that White House pressure to cut interest rates would risk fuelling inflation just as Trump's tariffs boost prices.

Yields on 30-year bonds US30YT=RR fell 6 basis points to 4.812%, while two-year yields US2YT=RR rose 3 basis points to 3.83% flattening the yield curve.

Fed fund futures 0#FF: ran into selling as investors scaled back the extent of rate cuts expected by year-end to around 81 basis points. 0#USDIRPR

Tariffs are still seen dragging on the global economy as the International Monetary Fund on Tuesday slashed its forecasts for growth in the United States, China and most countries.

Still, the general improvement in risk sentiment helped oil prices recover some of their hefty losses with gains of around % on Tuesday. O/R

Early Wednesday, Brent LCOc1 rose a further 67 cents to $68.09 a barrel, while U.S. crude CLc1 added 64 cents to $64.31 per barrel.

Safe-haven gold ran into profit-taking and slipped 0.8% to $3,353 an ounce XAU=, off an all-time peak of $3,500.

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