By Rae Wee and Chuck Mikolajczak
SINGAPORE/NEW YORK (Reuters) - Stocks rose and U.S. Treasury yields firmed on Wednesday as investors assessed the latest U.S. tariff salvo along with Federal Reserve Chair Jerome Powell’s signal of a patient path for rate cuts.
Financial markets were largely biding time ahead of a reading on U.S. consumer prices due later in the day which could guide the outlook for monetary policy there.
Investors also had their eye on any tariff developments, with advisers to U.S. President Donald Trump said to be finalising plans for reciprocal tariffs that he has vowed to impose on every country that charges duties on U.S. imports.
Trump had on Monday raised tariffs on steel and aluminum imports to 25% from the previous 10%, eliminated country exceptions, as well as product-specific exclusions, though said he was considering an exemption for Australia.
Japan’s industry minister Yoji Muto said on Wednesday that the government has also requested that the United States exempt Japan.
Mexico, Canada and the European Union, meanwhile, condemned the move, with the EU saying the 27-nation bloc would take "firm and proportionate countermeasures".
Despite all the uncertainty, stock futures pointed to a positive open in Europe, as investors focused on corporate earnings and the prospect that threatened U.S. duties could be used as a negotiating tool instead, with more punitive measures watered down or postponed.
EUROSTOXX 50 futures (STXEc1) were up 0.2% while DAX futures gained 0.27%. FTSE futures were flat.
European shares had closed a choppy Tuesday session at a record high, with the benchmark STOXX index logging gains of nearly 8% so far this year.
"Solid earnings from EU corporates and a view that perhaps we’re closer to trough European growth are also offering tailwinds, while funds part switch from U.S. equity on frustrations that the U.S. AI/tech trade is lacking a buzz, with questions increasing around ongoing U.S. exceptionalism," said Chris Weston, head of research at Pepperstone.
Nasdaq futures were little changed, while S&P 500 futures slipped 0.08%.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.55%, though gains were capped as traders awaited the U.S. inflation figures.
"Overall, Powell’s steady tone, cautious Asian equity performance, and the anticipation of U.S. CPI data underscore a market environment focused on inflation risks and policy clarity," said Shier Lee Lim, lead FX and macro strategist for APAC at Convera.
"Tariff developments, while notable, have yet to significantly shift sentiment, as markets remain anchored by central bank guidance and macroeconomic data."
China’s CSI300 blue-chip index and the Shanghai Composite Index (SSEC) rose 0.3% each.
Hong Kong’s Hang Seng Index jumped 1.83%. Hong Kong-listed shares of Alibaba (NYSE:BABA) surged to a four-month peak after a media report that it is partnering with Apple (NASDAQ:AAPL) to roll out artificial intelligence features for iPhone users in China.
Japan’s Nikkei rose 0.4%.
Treasury yields extended gains after Powell’s testimony as investor attention turns to the latest reading of consumer prices on Wednesday.
The yield on benchmark U.S. 10-year notes touched a one-week high of 4.5560%, while the two-year yield steadied at 4.3023%. [US/]
Markets have been slowly scaling back expectations for Fed rate cuts this year, largely expecting the U.S. central bank to hold rates steady at its March and May meetings.
Powell on Tuesday said: "We are in a pretty good place with this economy", noting that the Fed was in no hurry to make further interest rate cuts, but stood ready to do so if inflation declines further or the job market weakens.
In currencies, the dollar’s tariff-driven rally hit pause on Wednesday, with the euro (EUR=EBS) steadying at $1.0359, while sterling last fetched $1.2446.
"We’ve seen a lot of volatility come off of tariff headlines in the last two weeks," said Helen Given, FX trader at Monex USA in Washington.
"But what we’re seeing now is that those headlines and those announcements are not necessarily an indication that these tariffs are actually going to be levied, at least not at the time that we think that they might be."
The yen fell more than 0.7% to 153.65 per dollar.
Oil prices retreated from recent peaks hit on the back of Russian and Iranian supply concerns, with Brent crude falling 0.38% to $76.71 per barrel. U.S. crude similarly slid 0.42% to $73.01.
Spot gold held near a record high at $2,888.25 an ounce. [GOL/]