Asian markets experienced a dramatic surge on Thursday, rebounding sharply after President Donald Trump announced a 90-day pause on tariffs for many countries, offering a temporary respite from weeks of trade-induced volatility.
However, this wave of optimism was tempered by the fact that China remained excluded from the tariff pause, with its tariff rate instead being increased to a staggering 125%, highlighting the ongoing tensions between the world’s two largest economies.
Japan’s benchmark Nikkei 225 index led the charge, soaring 8%, while South Korea’s Kospi index jumped more than 5%, and Australia’s ASX 200 also climbed by 5% during early trading hours, reflecting a widespread relief rally across the region.
Japan’s Nikkei share average surged on Thursday as investors rushed to buy back beaten-down stocks in response to Trump’s announcement.
As of 0147 GMT, the Nikkei was up a remarkable 7.9% at 34,226.17, while the broader Topix climbed 7.2% to 2,518.26.
“Investors bought back stocks today, wishing that they had not dumped stocks in the previous session,” observed Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory, capturing the sentiment of many market participants.
“But the rally also means that the market was too bearish about the impact of Trump’s tariffs,” Suzuki added, suggesting that the initial negative reaction may have been overblown.
This week has been marked by extreme volatility for the Nikkei, with the index closing 6% higher on Tuesday after a brutal 7.8% slump on Monday that sent it to a 1 1/2-year low, underscoring the sensitivity of the market to trade-related news.
The index closed 4% lower on Wednesday, further highlighting the turbulent conditions.
Wall Street roars back: a stunning reversal of fortune
Thursday’s rally in Asia followed a spectacular overnight surge on Wall Street, with the S&P 500 soaring 9.5% for its biggest daily gain since 2008, suggesting that the global market was united in its relief.
Uniqlo-brand owner Fast Retailing jumped 7.2%, providing the biggest boost to the Nikkei index.
Chip-related shares also experienced significant gains, with Tokyo Electron and Advantest advancing 11.77% and 13.66%, respectively, underscoring the sector’s sensitivity to trade developments.
All of the Tokyo Stock Exchange’s (TSE) 33 industry sub-indexes rose, with the nonferrous sector surging 12.65% to become the top gainer, reflecting a broad-based market recovery.
The banking sector, which had been hit hard by concerns about an economic slowdown, rose 9.2%, highlighting the sector’s vulnerability to economic uncertainty.
Bullish on Japan: a strong underlying dynamic
Morgan Stanley analysts noted that Trump’s decision is particularly bullish for Asian equities, singling out Japan as a prime beneficiary.
They believe that Japan “has a strong underlying reflationary dynamic but came closest in our coverage to pricing in such a recession at the lows on Monday,” suggesting that the market had significantly underestimated Japan’s economic strength.
All but one of the 225 stocks on the Nikkei rose, and an overwhelming 99% of the more than 1,600 stocks trading on the TSE’s prime market experienced gains.
After Trump announced the pause, Taiwan’s foreign minister stated that it has given breathing space for more in-depth talks, and that the island nation hopes to take advantage of the “huge” US market for a balanced trade, indicating a strategic focus on strengthening economic ties with the US.
Taiwan Foreign Minister Lin Chia-lung stated that the government is committed to increase its purchases from its investments made in the United States and reduce its trade surplus with America, which is considered its most important international backer.
“Now that we have an additional 90 days, we can discuss Taiwan-US economic and trade cooperation in a more detailed and in-depth manner. We hope to take advantage of the huge US market, their excellent technology capital and talent, to form a Taiwan-US coalition, a joint fleet approach,” Minister Lin said.
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