By Rae Wee and Johann M Cherian
SINGAPORE (Reuters) -Global stocks advanced on Thursday, underpinned by optimism around artificial intelligence and the prospect of upcoming interest rate cuts, while investors kept a cautious eye on U.S. President Donald Trump’s ongoing assault on international trade.
U.S. copper futures widened their premium to the London benchmark overnight after Trump announced plans to impose a 50% tariff on copper imports. He said the levies would come into effect on August 1.
Trump also threatened a punitive 50% tariff on Brazil’s exports to the U.S. on Wednesday and issued tariff notices to seven minor trading partners.
The latest tariff moves did little to rattle markets as European stocks gained, with Germany’s DAX up 0.1% and UK’s FTSE 100 rising 1% to their respective all-time highs.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5%. U.S. stock futures took a breather, with Nasdaq futures down 0.1% after the tech-heavy index closed at a record high on Wednesday.
The market reaction to Trump’s tariff developments this week was less severe than in April, and Jeff Ng, SMBC’s head of Asia macroeconomic strategy, said investors had grown somewhat “numb” to the ever-changing situation.
“They know that there is still room for negotiation. A lot of these announcements, they start off with eye-catching numbers, but they are not totally final, and they are still subject to changes. Even if they are implemented, they could also be reversed in the coming few months to year,” he said.
Meanwhile, investors digested upbeat quarterly results from TSMC that reflected strong demand for the world’s largest contract chipmaker’s products, kept alive by surging interest in artificial intelligence applications.
TSMC’s report came a day after AI chip giant Nvidia became the world’s first public company to hit a $4 trillion market value. Other tech-related stocks in Korea and Japan further got a boost.
Also keeping stocks supported were expectations of at least two interest rate cuts by the Federal Reserve this year.
Minutes released on Wednesday showed “most participants” at the Fed’s meeting last month anticipated rate cuts would be appropriate later this year, with any price shock from tariffs expected to be “temporary or modest.”
“Our view remains that in the balance of risks between employment and inflation, Fed would be more sensitive to employment than to inflation. Hence, if our view holds, and we get some weakness in the employment numbers over summer, Fed will respond by cutting rates in September,” said Mohit Kumar, an economist at Jefferies.
DOLLAR EASES
The dollar was on the back foot on Thursday against the euro, but holding its own against the yen at 146.35, after a sharp rise earlier this week when Trump slapped Japan with 25% tariffs.
The euro was up 0.17% to $1.1734 and sterling gained 0.15% to $1.36110.
An exception was the Brazilian real, which languished near a one-month low at 5.5826 per dollar owing to Trump’s tariff threat on Latin America’s largest economy.
The real’s volatility gauges spiked to the highest since late April when markets were still trying to get to grips with Trump’s “Liberation Day” tariff threats.
“Without a clear path yet to de-escalation, the real is likely to continue to trade on a softer footing in the near-term. The initial real sell-off was exacerbated by the unwind of popular carry trades,” Lee Hardman, a senior currency economist at MUFG said.
“The risk is that carry trades continue to be unwound on the back of heightened trade risks and higher financial market volatility triggering a further reversal of real gains.”
In cryptocurrencies, bitcoin was pinned near a record high and was last at $111,207, while ether was up 1.8% to $2,790.9.
Elsewhere, crude prices were steady with Brent futures hovering at $70.2 per barrel, while U.S. crude was flat at $68.33 a barrel. [O/R]
Spot gold rose 0.22% to $3,320.59 an ounce. [GOL/]
(Reporting by Rae Wee and Johann M Cherian; Editing by Jamie Freed and Bernadette Baum)
