Asian stock markets displayed a cautiously positive tone at Wednesday’s open, attempting to build on a multi-day rally in US equities.
However, investor conviction appeared tentative ahead of crucial US economic data releases and a heavy slate of corporate earnings reports that are expected to provide critical insights into the impact of ongoing tariff policies and the health of the global economy.
Rally drivers: Fed hopes and tariff optimism set stage
The trading day in Asia began following the S&P 500 index securing its sixth consecutive day of gains in the US.
This recent upward momentum has been fueled by optimism that corporations can navigate slowing economic growth and tariff-related disruptions, coupled with increased market bets that the Federal Reserve might cut interest rates sooner rather than later to prevent a recession.
Some tentative signs of easing trade rhetoric had also offered support earlier in the week.
Andrew Brenner at NatAlliance Securities captured some of this cautious optimism: “Many are still calling for a recession and even lower equity levels, but we think the ‘Trump put’ is real for equities while the ‘Fed put’ is real for the economy… we think the worst is behind us,” he told Bloomberg.
US GDP, inflation data, and big tech earnings
However, this nascent rally faces significant hurdles today (Wednesday).
The release of US first-quarter Gross Domestic Product (GDP) figures and key inflation data will offer the first major look at how the economy was performing just before President Donald Trump’s country-specific tariff announcements on April 2 took full effect.
These data points are crucial for assessing the underlying economic strength and potential inflationary pressures.
Adding to the importance of the week, earnings season continues with reports expected from technology titans Microsoft Corp., Apple Inc., Meta Platforms Inc., and Amazon.com Inc.
Analysts anticipate the broader “Magnificent Seven” group (which also includes Alphabet, Tesla, and Nvidia) to deliver average profit growth of around 15% for 2025, a forecast that has remained relatively stable despite recent trade tensions.
However, maintaining this growth trajectory amidst potential economic headwinds will be key for market sentiment.
Trump’s words vs market realities
While recent market action suggests some comfort drawn from perceived tariff reprieves, uncertainty around President Trump’s trade strategy remains high.
In the latest development, Trump signed an executive order designed to ease the impact of his auto tariffs, preventing duties on foreign vehicles from stacking and lessening charges on imported parts used in US manufacturing.
However, during a Tuesday event marking his first 100 days in office, Trump also renewed his criticism of Fed Chairman Jerome Powell and defended his administration’s steep tariffs on Chinese exports, predicting Beijing could mitigate their impact on US consumers.
This mix of targeted easing alongside continued hardline rhetoric keeps investors guessing about the true direction of trade policy.
Earnings paint mixed picture amid headwinds
Early earnings reports from Asia provided some positive signals, with Samsung Electronics Co.’s chip division beating profit expectations, reportedly due to Chinese customers stockpiling supplies ahead of potential US tariff impacts.
However, signs of strain are evident elsewhere.
General Motors Co. and JetBlue Airways Corp. recently pulled their forward-looking guidance.
United Parcel Service Inc. announced plans to cut 20,000 jobs this year.
After the US market close Tuesday, Starbucks Corp. reported sales slightly below expectations, and while Visa Inc.’s earnings beat estimates, Snap Inc. declined to offer a sales forecast, citing macroeconomic “headwinds.”
Furthermore, Super Micro Computer Inc. tumbled in late trading after providing a disappointing update, weighing on US stock futures early Wednesday.
Bulls eye policy support, bears cite tariff risks
This mixed corporate picture reflects broader analyst uncertainty. “Looking ahead, we believe the worst-case scenarios for policy change may be in,” suggested Lauren Goodwin at New York Life Investments.
“But since uncertainty is still high… market volatility is likely to persist.”
Others remain more cautious. Strategists at HSBC Holdings Plc recently cut their year-end S&P 500 target to 5,600 (from 6,700), citing pressure on corporate earnings from tariffs and weaker-than-expected US growth.
“We expect the market narrative will flip-flop between recession and stagflation until tariff turmoil subsides, the Fed starts easing, and/or inflationary pressures fail to build up,” wrote HSBC strategists including Nicole Inui.
Market snapshot
In early Wednesday trading, Australian and Japanese shares saw modest gains.
Futures for Hong Kong pointed slightly higher. US stock futures edged lower following the Super Micro news.
US Treasuries extended recent gains, with 10-year yields falling for a seventh day to 4.16%.
The dollar was little changed after strengthening Tuesday. Gold rose slightly, while oil prices dipped.
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