Stocks Rally, Dollar Slips on Fed Rate-Cut Bets: Markets Wrap
(Bloomberg) — Stocks rallied with futures and the dollar weakened as optimism over a potential Federal Reserve interest-rate cut revived risk sentiment and outweighed renewed US-China trade tensions.
Asian shares rose 1.9%, the biggest intraday jump in more than two months, after Fed Chair Jerome Powell’s concerns about a weakening labor market reinforced expectations for an October rate cut. A gauge of the dollar fell for a second day, sending Asian currencies higher, while Treasury two-year yields hovered near their lowest levels since 2022. Gold hit a new peak.
Contracts for the Nasdaq 100 index extended their gains and rose over 0.5% as ASML Holding NV’s orders beat analyst expectations. Futures for the S&P 500 advanced 0.4% and those for European stocks jumped 1.3%.
Since the tariff-fueled selloff in April, global stocks have rebounded sharply on expectations of further monetary easing following the Fed’s September rate cut and optimism over artificial intelligence. That rally, however, faces fresh headwinds as trade tensions between the US and China resurface, with both sides stepping up rhetoric and signaling possible new restrictions on key technology.
“Macro uncertainty remains the key overhang for risk assets,” said Dilin Wu, a strategist at Pepperstone Group, in a note. “With rate-cut bets and solid earnings underpinning sentiment, I believe the downside for US stocks remains limited.”
Powell signaled the US central bank is on track to deliver another quarter-point interest-rate cut later this month, even as a government shutdown significantly reduces its read on the economy. Swap contracts are pricing in roughly 1.25 percentage points of rate cuts by the end of next year, from the current range of 4%-4.25%.
Boston Fed President Susan Collins also said the US central bank should continue lowering rates this year to support the labor market.
While Powell’s remarks set the tone for markets, investors were also monitoring a series of trade-related developments. President Donald Trump’s comments that he might halt cooking-oil trade with China had pushed the S&P 500 down 0.2%.
Amid the trade spat, China boosted its currency defense by keeping the so-called yuan fix at below 7.10.
“A fix below 7.10 sends a strong message of strength,” said Fiona Lim, a senior foreign-exchange analyst at Malayan Banking Bhd. in Singapore. “A strong yuan is symbolic of how China is in a position of strength for any negotiations or tit-for-tat escalations.”
The yen gained 0.4% against the dollar to 151.15. India’s central bank sold dollars both in offshore and onshore markets to support the rupee on Wednesday, according to people familiar with the trades.
What Bloomberg strategists say…
Fed dovishness is driving a fresh bout of dollar weakness, which also clears the path for hedging strategies centered on gold. The theme of buying stocks despite AI bubble fears — and adding to bullion holdings in case those fears become reality — looks to be getting a fresh run.
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
Meanwhile, US Trade Representative Jamieson Greer predicted that heightened tensions with China over export controls would ease, following talks between representatives of the two countries. Trump, too, sounded cautiously optimistic that a positive outcome could be reached.
“We have a fair relationship with China, and I think it’ll be fine. And if it’s not, that’s OK too,” Trump told reporters Tuesday at the White House. “We have a lot of punches being thrown, and we’ve been very successful.”
Elsewhere, the European Union is considering forcing Chinese firms to hand over technology to European companies if they want to operate locally, in an aggressive new push to make the bloc’s industry more competitive.
In France, Prime Minister Sebastien Lecornu won the crucial support of the Socialist Party in France’s National Assembly, significantly improving the chances of his new government surviving two no-confidence votes Thursday.
In Japan, the country’s first sale of government bonds since the ruling political coalition crumbled drew demand that was stronger than the 12-month average as higher yields attracted investors.
Amid the political uncertainty, the heads of Japan’s main opposition parties are expected to discuss Wednesday whether they can close policy gaps and pick a candidate of their own for the nation’s premiership.
Corporate News:
Asian luxury-goods stocks rose after LVMH sales unexpectedly returned to growth in the third quarter as shoppers splurged on Moët & Chandon Champagne and Dior perfumes, suggesting a persistent slump in luxury demand is easing. Apple Inc. is preparing to expand its manufacturing operations in Vietnam as part of a push into the smart home market and an ongoing effort to lessen its dependence on China. Stellantis NV will invest $13 billion in the US over the next four years, as it seeks to reinvigorate business in the critical market and curb the impact of tariffs. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.4% as of 6:43 a.m. London time Nasdaq 100 futures rose 0.5% The MSCI Asia Pacific Index rose 1.9% Japan’s Topix rose 1.6% Hong Kong’s Hang Seng rose 1.6% The Shanghai Composite rose 0.6% Euro Stoxx 50 futures rose 1.3% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1626 The Japanese yen rose 0.5% to 151.15 per dollar The offshore yuan rose 0.2% to 7.1277 per dollar The British pound rose 0.3% to $1.3358 Cryptocurrencies
Bitcoin fell 0.4% to $112,655.45 Ether was little changed at $4,118.07 Bonds
The yield on 10-year Treasuries declined two basis points to 4.01% Japan’s 10-year yield was little changed at 1.650% Australia’s 10-year yield declined two basis points to 4.22% Commodities
Spot gold rose 1.1% to $4,190.42 an ounce West Texas Intermediate crude fell 0.3% to $58.54 a barrel This story was produced with the assistance of Bloomberg Automation.
–With assistance from Ran Li and Iris Ouyang.
©2025 Bloomberg L.P.
