Asian stocks opened higher, boosting expectations of a Fed interest rate cut, amid renewed concerns about US–China trade tensions. Australia was in the green early in the session, while Japanese and Hong Kong futures signaled gains. Jerome Powell's comments on a weakening job market further strengthened the case for an October rate cut, although Wall Street faltered after President Donald Trump suggested he could halt the "cooking oil" trade with China.

In other asset markets, the dollar weakened, oil stabilized near a five-month low, and gold was flat after a three-day rally. Silver briefly dipped from its all-time high. The yield on the US 2-year Treasury note held near its lowest level since 2022. Interestingly, major banking stock indexes jumped on solid performance reports—unofficially kicking off earnings season.

Since the tariff-driven sell-off in April, global markets have rebounded on AI euphoria and hopes of monetary easing following the Fed's September rate cut. However, resurgent US–China tensions have become a headwind. Analysts consider this a mere "test of courage" ahead of negotiations in South Korea. The swap market is now pricing in a total of approximately 125 bps of cuts by the end of next year (from 4% to 4.25%). Powell believes the outlook hasn't changed since September (when the Fed cut and projected two more cuts), Susan Collins of the Boston Fed also supports a rate cut, and JPMorgan called Powell's signal "strong confirmation."

On the geopolitical front, USTR Jamieson Greer expects export tensions to hinder the conclusion of the latest talks—despite China's earlier sanctions on the US unit of a Korean shipping giant, escalating the struggle for maritime influence. Wall Street remains wary: tariffs have been a major source of volatility this year. Adding spice: a Bank of America survey showed a record high share of fund managers viewing AI stocks as a "bubble"; 54% believe technology valuations are overpriced. Essentially, bulls are banking on a rate cut, but two looming shadows—a trade war and an AI bubble—still loom. (asd)

Source: Newsmaker.id