Asian stocks traded in a tight range at the open after the Federal Reserve reiterated it isn’t in a rush to lower interest rates, and investors awaited the trade negotiations between China and the US before taking risky bets.
A regional gauge fell 0.4% and equity-index futures for the US were flat in early Asian trading. Chipmakers led the charge in the US session as Bloomberg News reported that the Trump administration planned to rescind Biden-era curbs for AI-related exports. The Nasdaq Golden Dragon China Index dropped the most in almost three weeks Wednesday.
Traders are staying cautious after Fed Chair Jerome Powell assuaged concerns about the US economy while warning that the risks of higher unemployment and faster inflation have risen. Global stocks have edged down this week after four consecutive weeks of gains as investors wait on the results of trade negotiations between several countries and the US, with a key focus on China.
“The markets didn’t love what the Fed served up. But they didn’t hate it either,” wrote Kyle Rodda, a senior market analyst at Capital.com. “A quite literally ‘wait and see’ message was delivered by the central bank as it highlighted the uncertain economic and policy backdrop it’s trying to navigate.”
Fed officials have said they are comfortable keeping rates steady until they have a better understanding of where the economy is headed after President Donald Trump announced a slew of tariffs last month.
Treasury yields fell across the curve Wednesday with the 10-year benchmark falling around three basis points to 4.27%. An index of the greenback rose 0.5%. The yen was steady early Thursday in Asia after weakening almost 1% in the prior session. Gold edged up after slumping almost 2% in the prior session.
Meanwhile, Trump said he’s unwilling to preemptively lower tariffs on China in order to unlock more substantive negotiations with Beijing on trade. Stocks got a lift Wednesday after China and the US announced plans to do trade talks in Switzerland this weekend.
Price action Wednesday was especially muted when compared to April 16, when stocks and the dollar tumbled after Powell first mentioned the growing tension between the Fed’s dual mandate of controlling price pressures and bolstering employment. His comments then, coming amid a wild stretch in markets, were taken by traders as a vow to prioritize the fight against inflation even if it proved costly for investors.
Market turbulence has calmed significantly since the first weeks of April, partly thanks to Trump’s trade concessions but also owing to a string of economic reports that gave confidence to bulls. Friday’s jobs report, which showed unemployment held steady at 4.2%, followed readings on the services economy and inflation that also offered few recessionary signals.
How long the good news will last as Trump’s trade policies play out is the biggest question confronting central bankers.
“The Fed is not really sure where tariffs are going to land, which is important, and when they land they’re not really sure what the consequences are going to be on growth versus inflation,” said William Dudley, the former New York Fed president, on Bloomberg Television. “This is not just about the central scenario, it’s also about risk management. Try not to do the wrong thing so that you can respond effectively as things actually unfold.”
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