Asia stocks climb on dovish Powell remarks; trade jitters limit upside

Investing.com-- Asian stock markets rebounded on Wednesday after steep losses earlier this week, as investors took comfort from dovish comments by Federal Reserve Chair Jerome Powell, even as renewed U.S.-China trade tensions kept sentiment fragile.

Wall Street ended mixed overnight in a choppy trade, but sentiment remained upbeat with strong earnings from major U.S. banks.

U.S. stock index futures were little changed in Asia hours as of 02:50 GMT.

Powell’s dovish comments help Asia stocks bounce back

The relief rally followed Powell’s remarks on Tuesday that the U.S. economy was on firmer footing but cautioned that a notably softer labor market was emerging. He said the central bank was considering an end to its balance sheet drawdown, known as quantitative tightening.

The comments were interpreted as signaling that the Fed may cut rates again later this year. U.S. Treasury yields fell and the dollar weakened following Powell’s speech, helping lift risk appetite across Asian markets.

"This reinforces expectations for further rate cuts, potentially two more this year, with Powell indicating that the policy stance could shift to neutral as risks become more balanced," MUFG analysts said in a note.

Japan’s Nikkei 225 jumped 1.4% on Wednesday after plunging nearly 3% in the previous session. The broader TOPIX index climbed 1.3%.

Australian S&P/ASX 200 rose 0.9%, while Singapore’s Straits Times Index gained 0.5%.

South Korea’s KOSPI jumped 1.7%, with tech stocks leading gains.

Futures for India’s Nifty 50 ticked higher before market open.

US-China trade tensions limit gains

China’s blue-chip Shanghai Shenzhen CSI 300 and the Shanghai Composite both traded flat on Wednesday.

Hong Kong’s Hang Seng index advanced 1% on Tuesday after sharp losses this week.

The rebound came against a tense trade backdrop after relations between Washington and Beijing soured again last week.

U.S. President Donald Trump escalated rhetoric on Tuesday by suggesting that Washington could cut trade ties with China in the cooking-oil sector, calling Beijing’s recent reduction in soybean imports an “economically hostile act.”

Still, the Powell-driven optimism outweighed trade concerns for now. Financial and consumer shares led regional gains.

China CPI, PPI show persistent deflationary trend

Data on Wednesday showed that China’s economy remains under pressure. Figures revealed that consumer prices fell 0.3% in September from a year earlier, compared with a 0.4% decline in August.

Producer prices fell 2.3% year-on-year, easing from a 2.9% drop the previous month.

As the data signaled persistent deflationary pressures, the government is expected to dole out more supportive measures in the coming months to support economic growth.