Asian stocks surge as Fed rate cut signals outweigh US-China trade tensions

Asian stocks rose sharply on Wednesday as hopes for another US Federal Reserve rate cut outweighed concerns over renewed US-China trade tensions.

After several days of volatility driven by escalating tariff threats, investors returned to the market, extending a months-long rally led by technology shares.

Federal Reserve Chair Jerome Powell signaled that the central bank is prepared to lower interest rates again this month to support the slowing labor market. He acknowledged that while inflation remains above the bank’s target, recent economic data point to weakening job growth.

“In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen,” Powell said, adding that longer-term inflation expectations are still consistent with the Fed’s two-percent goal.

He also hinted that the central bank might soon end its reduction of bond holdings accumulated during the pandemic, a move that had helped keep borrowing costs low. The Federal Reserve has a dual mandate to ensure stable prices and maximum employment, and Powell’s comments suggest a shift toward prioritizing job growth.

The United States has yet to release official September employment data due to the ongoing government shutdown, but private reports indicate a slowdown in hiring.

Wall Street closed mixed on Tuesday, but well off its session lows, and Asian markets picked up the momentum on Wednesday.

Hong Kong, Tokyo, Taipei, and Seoul all climbed more than one percent, while Sydney, Singapore, and Wellington also advanced. Shanghai edged higher despite data showing a fall in Chinese consumer prices last month, signaling weak domestic demand.

Powell’s remarks helped ease investor anxiety about the latest trade flare-up between Washington and Beijing. US President Donald Trump last week threatened 100-percent tariffs in response to China’s new restrictions on rare earth exports. Although he softened his stance over the weekend, China responded by sanctioning five American subsidiaries of South Korean shipbuilder Hanwha Ocean, accusing them of aiding US investigations into the shipping industry.

Still, optimism remains that both sides may find a way to de-escalate. “We have a fair relationship with China, and I think it’ll be fine. And if it’s not, that’s okay too,” Trump told reporters.

US Trade Representative Jamieson Greer said senior officials from both countries had discussed the rare earth dispute on Monday, expressing cautious optimism about progress. “We’ve been pretty successful in finding a path forward with them in the past, so we think we’ll be able to work through it,” he told CNBC.

At around 0230 GMT, Tokyo’s Nikkei 225 was up 1.3 percent at 47,463.31, Hong Kong’s Hang Seng gained 1.5 percent to 25,826.42, and Shanghai rose 0.4 percent to 3,881.03.

In currency markets, the euro climbed to $1.1621, the pound rose to $1.3348, and the dollar weakened slightly to 151.17 yen. Oil prices were steady, with West Texas Intermediate flat at $58.71 a barrel and Brent crude unchanged at $62.40.

On Wall Street, the Dow Jones Industrial Average closed 0.4 percent higher at 46,270.46, while London’s FTSE 100 edged up 0.1 percent to 9,452.77.