Markets hit by Wall Street setback and Trump’s unexpected Gaza proposal
Asian stock markets faced challenges on Wednesday, as Wall Street futures took a hit from disappointing earnings reports and the dollar weakened against the yen following a dip in Treasury yields.
Investors were also nonplussed by comments from President Donald Trump that the U.S. would like to take over the war-ravaged Gaza Strip and develop it economically, News.Az reports, citing Reuters.
The suggestion came out of the blue and underlined the risk of more policy uncertainty and market volatility ahead.
The mood was helped a little when Beijing set a firm fix for its yuan, countering concerns it might allow the currency to slide to offset the impact of tariffs on its exports.
China has so far made a relatively restrained response to Trump's added 10% in tariffs, announcing levies that covered just $14 billion of U.S. exports to China.
"The measures are fairly modest, at least relative to U.S. moves, and have clearly been calibrated to try to send a message to the U.S. without inflicting too much damage," said Julian Evans-Pritchard, head of China economics at Capital Economics.
"The risk is that China's retaliation proves too modest to exert any real pressure on the U.S. to reverse tariffs, but sufficiently defiant to trigger a further escalation."
A survey did show China's services activity expanded at a slower pace in January, but analysts suspected much of that was due to the timing of the Lunar New Year holidays.
Chinese blue chips returned from holiday with a minor dip of 0.2%.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.6%, and South Korea's main index bounced 1.2%. Japan's Nikkei went flat as the yen rose broadly along with local bond yields.
EUROSTOXX 50 futures fell 0.5%, while FTSE futures eased 0.2% and DAX futures 0.4% amid the lingering risk of U.S. taxes on trade.
Having bounced on Tuesday, Wall Street futures ran into selling when Alphabet earnings missed forecasts as it ramped up spending on capex. Its shares dived 7.6% in extended trading, wiping $192 billion off its market capitalisation.
S&P 500 futures fell 0.4% and Nasdaq futures lost 0.5% in response. Results out Wednesday include Uber, Ford, Qualcomm and Walt Disney.
The delays to tariffs on Canada and Mexico had at least eased worries the Federal Reserve might be severely restricted in how far it could cut interest rates and prompted a bounce in fund futures.
Yields on two-year Treasuries were back at 4.224% and off a peak of 4.282% hit on Monday.
The pullback in yields coincided with a retreat in the dollar from its peaks, with the dollar index down at 108.050 from Monday's spike top of 109.880.
The euro firmed to $1.0380 , a remarkable round trip from the two-year trough of $1.0125 struck at the start of the week. Likewise, the dollar had recoiled to 1.4327 Canadian dollars from a 22-year high of 1.4792.
The dollar also slipped 0.7% on the Japanese yen to touch a seven-week low at 153.09 , breaking support at 153.72.
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