Stocks rally as Trump soothes fears over China trade, Fed

US President Donald Trump. Photo / Getty Images

A relief rally swept global equity markets on Wednesday as comments by US President Donald Trump, that he had “no intention” of firing the head of the Federal Reserve and his signals of possible tariff cuts for China, reassured investors.

Global markets, already upended by Trump’s trade war, were hit at the start of the week by fears he was looking to remove central bank boss Jerome Powell for not cutting interest rates, calling him a “major loser” and “Mr. Too Late”.

Experts warned such a move would deal a blow to the Fed’s independence and spark a crisis of confidence in the world’s top economy.

However, Trump tempered those fears on Tuesday. “I have no intention of firing him,” he said.

“These comments have given markets a sense of optimism that recent chaos might have peaked and we’re heading towards calmer waters,” said AJ Bell investment director, Russ Mould.

Wall Street’s main equity indices, which had already gained more than 2% on Tuesday, jumped again on Wednesday.

“‘Buy America’ is back in action,” said Briefing.com analyst Patrick O’Hare, noting that the actions of the Trump administration would determine if that remained the case.

European stock markets also rallied, with Frankfurt gaining more than 3%.

Meanwhile, data showed that business activity in the eurozone remained “broadly unchanged” in April as manufacturing held up in the face of US tariffs despite waning confidence for the year ahead.

In Britain, however, the purchasing managers’ index tumbled more than expected to a two-and-a-half-year low.

Further comments by Trump on Tuesday indicating a more conciliatory approach to the trade war with China, added to the positive market sentiment.

Washington has imposed tariffs of 145% on a range of products from China, while Beijing has replied with 125% duties on imports from the United States.

Trump acknowledged that the US levies were at a “very high” level and that it would “come down substantially”.

That came after Treasury Secretary Scott Bessent told a closed-door event in Washington that he expected a de-escalation soon in the United States’ tariff standoff with China.

He confirmed on Wednesday, however, that trade talks with China were not currently under way and ruled out a unilateral tariff cut by the United States.

Gold, which had hit a record high above $3500 Tuesday on a rush to safety, retreated to around $3300 an ounce, while the dollar clawed back some of its recent losses against the pound, euro and yen.

“Looking at the dollar’s more muted reaction, you get the feeling that it is more of a reluctant view that Trump is slowly backing down on trade tariffs. It is actions that count,” said City Index and FOREX.com analyst Fawad Razaqzada.

In Asia, Hong Kong stocks surged on the back of a rally in tech firms including Alibaba and Tencent, and Tokyo’s stock market also gained.

Taipei jumped more than 4%, helped by a 7% surge in chip titan TSMC.

In company news, shares in Tesla jumped around 8% after Elon Musk said he would significantly scale back his Trump administration work to focus on the electric vehicle maker, which reported a 71% drop in first-quarter profits.

Key figures at 1530 GMT

• New York - Dow: UP 1.8% at 39,876.54 points
• New York - S&P 500: UP 2.2% at 5,402.69
• New York - Nasdaq Composite: UP 3.1% at 16,802.13
• London - FTSE 100: UP 0.9% at 8,403.18 (close)
• Paris - CAC 40: UP 2.1% at 7,482.36 (close)
• Frankfurt - DAX: UP 3.1% at 21,961.97 (close)
• Tokyo - Nikkei 225: UP 1.9% at 34,868.63 (close)
• Hong Kong - Hang Seng Index: UP 2.4% at 22,072.62 (close)
• Shanghai - Composite: DOWN 0.1% at 3,296.36 (close)
• Euro/dollar: DOWN at $1.1383 from $1.1420 on Tuesday
• Pound/dollar: DOWN $1.3284 at $1.3330
• Dollar/yen: UP at 142.30 yen from 141.56 yen
• Euro/pound: UP at 85.70 pence from 85.67 pence
• Brent North Sea Crude: DOWN 2.6% at $65.72 per barrel
• West Texas Intermediate: DOWN 2.8% at $61.89 per barrel

-Agence France-Presse