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Stocks bask in Trump glow, tariff uncertainty weighs on dollar
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Stocks bask in Trump glow, tariff uncertainty weighs on dollar
Jan 21, 2025 6:34 PM

SYDNEY/NEW YORK (Reuters) - Global stocks gained on Wednesday as a flurry of new policies from U.S. President Donald Trump combined with robust corporate earnings to bolster investor optimism, while tariff uncertainty kept the dollar near two-week lows.

Netflix shares surged 14% in after-hours trading as the streaming giant added a record number of subscribers last quarter, enabling it to increase prices for most service plans in the United States and other countries.

That helped lift Nasdaq futures 0.5% in Asia. S&P 500 futures also rose 0.2%.

Late on Tuesday, Trump announced that OpenAI, SoftBank and Oracle will form a joint venture called Stargate and invest up to $500 billion in artificial intelligence infrastructure. Shares of SoftBank surged 9% in Tokyo, while Oracle already gained 7% overnight.

Helping risk sentiment is also relief that Trump did not announce a more comprehensive sweep of tariffs at the start of his second presidency. Many investors and foreign capitals had expected tariffs to be among a raft of executive orders Trump signed in his first day in office.

However, he did talk up the threat of tariffs again on Tuesday, vowing to hit the European Union with fresh levies. He also said his administration was discussing imposing a 10% tariff on goods from China on Feb. 1.

"I think we're pricing out all the extreme moves," said Hoe Lon Leng, global head of FX flow and EM rates linear trading at Nomura in Singapore.

"I think Trump seems to be more outcome driven. I think he wants to do a good job and ... that means the recent oil prices, the recent move higher in bond yields would have affected his position on pushing things to the extreme."

Japan's Nikkei jumped 1.4%, tracking broad gains on Wall Street. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1% as falls in Chinese stocks offset broad gains in Taiwan and South Korea.

Chinese blue chips fell 1.2% and the Hong Kong's Hang Seng index lost 1.5%.

The temporary tariff relief has supported a pullback in Treasury yields. The U.S. 10-year Treasury yield was, however, 2 basis points higher in Asia at 4.595%, having dipped 4 bps overnight.

They were still up around a percentage point since the Federal Reserve started cutting rates in mid-September, reflecting a strong economy and dwindling prospects for large Fed reductions this year.

Futures imply a total easing of 37 basis points from the Fed this year, with the first rate cut not fully priced in until July.

The U.S. dollar slipped 0.1% against its major peers on Wednesday to 108.08, just above a two-week low of 107.86, after finishing a choppy session overnight little changed.

The euro eased 0.2% to $1.0412, just off a three-week top of $1.0435. The Canadian dollar, which had hit a five-year low on Tuesday, clawed back most of its losses and was last at 1.4332 per U.S. dollar.

Bitcoin held near a record high at $105,701, having rallied 4% overnight as the top U.S. markets regulator created a task force to develop a regulatory framework for crypto assets.

"The road for bitcoin to reach $120,000 is plausible," said Billy Leung, investment strategist at Global X.

Oil prices were flat on Wednesday, having fallen more than 2% overnight as Trump planned to boost U.S. energy production. Brent crude held at $79.29 a barrel, while U.S. crude was little changed at $75.88 a barrel. [O/R]

Gold also resumed its climb to its previous record high. Spot prices rose 0.1% to $2,747.04 per ounce, having jumped 1.4% overnight.

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