Investor optimism rises as US-China trade rhetoric softens

US equities closed higher on Wednesday, continuing a strong mid-week rebound with the S&P 500 rising over 2.70% to close at 5 431.32, the Nasdaq rallying at 3.87% with a close of 16 931.91, while the Dow Jones gained over 800 points at 40 010.10, extending Tuesday’s strong rally. Gains were broad-based, led by technology and consumer discretionary sectors, as markets welcomed more reassuring rhetoric from President Donald Trump. His confirmation that he does not intend to remove Federal Reserve Chair Jerome Powell helped to calm investor sentiment over potential political interference in monetary policy. Further optimism stemmed from a softer tone on US-China relations, with the President expressing hopes for more constructive dialogue going forward.

European shares followed Wall Street’s lead, closing the day higher. The Stoxx 50 closed 2.80% higher at 5 100 and Stoxx 600 advanced 1.80% to close at 517 - both posting gains, supported by strength in industrial and tech sectors. The euro hovered around $1.14, just shy of the recent $1.15 peak, as sentiment around the Federal Reserve’s independence steadied. Investors also responded positively to expectations of higher defence spending, particularly in Germany. Meanwhile, the European Central Bank reduced its deposit rate by 25 basis points to 2.25%, its lowest since early 2023. Markets are now pricing in the possibility of two to three more cuts before year-end.

Markets across Asia also ended the day in positive territory. The Nikkei 225 and Hang Seng Index both recorded gains, closing at 34 686.63 (1.89%) and 22 050.12 (2.26%) respectively, bolstered by easing global tensions and a more dovish outlook from the US. The rally was further underpinned by hopes that stabilising trade relations between the US and China could support regional growth and export momentum.

In South Africa, inflation data released on Wednesday showed the annual rate eased to 2.70% in March 2025, marking the lowest reading since mid-2020. The decline was largely attributed to softer fuel and education prices. Some analysts say the latest inflation numbers does give SARB scope to cut interest rates at its next monetary policy meeting in May, depending on domestic and global economic conditions. The rand traded at 18h22 at 18.63 to the US dollar. 

Brent crude oil futures fell further to below $67 per barrel on Wednesday, an 11% plunge since the start of April amid the possibility that OPEC+ may continue to increase supply in upcoming months. Gold prices extended their pullback to below $3,280 per ounce on Tuesday after hitting a record of $3,500 the prior session. The pullback in bullion stood in contrast to the rally seen in other dollar-denominated financial assets, which have been buoyed by renewed hopes of a de-escalation in trade tensions between the US and China.