U.S. Treasury yields fell sharply on Wednesday, pulling down the dollar as concerns over slowing economic growth in the world’s largest economy intensified. The drop in yields coincided with struggles in oil prices, while Asian stock markets made modest gains, buoyed by anticipation of Nvidia’s earnings report later in the day.
U.S. copper prices surged by over 4%, following President Donald Trump’s decision to initiate a probe into potential tariffs on copper imports. Conversely, global copper prices declined overnight, reflecting broader market uncertainties.
The market reacted to a sharp decline in U.S. consumer confidence, which saw its biggest drop in over three years, with surveys continuing to signal growing unease among both businesses and consumers. The latest data sparked speculation about further interest rate cuts by the Federal Reserve, with futures now pricing in nearly 60 basis points of easing by the end of the year, up from 40 basis points just a week ago.
Joseph Capurso, head of international economics at Commonwealth Bank of Australia, expressed surprise at the timing of the weak consumer confidence numbers, noting that they surfaced before consumers had fully felt the impact of tariffs.
As a result, U.S. Treasury yields remained under pressure on Wednesday, with the benchmark 10-year yield hitting a more than two-month low of 4.2830%. The two-year yield dropped to 4.0860%, also reflecting increased bets on a Fed rate cut.
This decline in yields weighed on the U.S. dollar, particularly against the Japanese yen, with the greenback losing 0.13% to trade at 148.81 yen, after hitting a four-month low in the previous session. The euro edged close to a one-month high, trading at $1.0522, while the British pound also hovered near a two-month peak at $1.2675.
Capurso noted that while the dollar is weakening due to soft economic data, it could strengthen again if a more severe downturn or recession triggers safe-haven flows into the currency.
Concerns over U.S. growth also dampened oil demand prospects. Brent crude rose 0.34% to $73.27 per barrel, recovering slightly after a 2% drop the previous session. West Texas Intermediate (WTI) climbed 0.36% to $69.18 per barrel, partially reversing a 2.5% slump.
Gold saw slight gains, rising 0.1% to $2,918.50 an ounce, benefiting from safe-haven flows amid broader economic uncertainty.
In Asia, the MSCI Asia-Pacific index (excluding Japan) advanced by 0.63%, led by a strong performance in Chinese stocks. The Hang Seng Index surged over 2%, with the Hang Seng Tech index climbing 2.7%. Meanwhile, the CSI300 blue-chip index rose 0.54%, and the Shanghai Composite gained 0.7%.
China’s stock rally has been fueled by enthusiasm around DeepSeek’s advancements in artificial intelligence, sparking renewed interest in the country’s tech sector. However, investor sentiment was briefly dampened by news that the Trump administration plans to tighten restrictions on Chinese semiconductor exports and curb Chinese investments in critical U.S. sectors.
Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho, cautioned against underestimating the impact of U.S. tariff threats, especially concerning China. He argued that these measures could disrupt China’s technological progress and manufacturing capacity.
In contrast, Japan’s Nikkei index dropped by 1.15%, reflecting broader regional market weaknesses.
U.S. stock futures showed signs of recovery after a mixed session on Wall Street. Nasdaq futures rose by 0.34%, while S&P 500 futures gained 0.2%. European futures also pointed higher, with EUROSTOXX 50 futures up by 0.37%, and FTSE futures rising 0.46%.
Investors are closely watching Nvidia’s quarterly earnings report, set to be released later on Wednesday. As one of the standout players in the AI sector, Nvidia’s performance could offer crucial insights into the future of AI demand, especially amid growing skepticism about the pace of returns from massive investments in AI infrastructure.
Jacob Falkencrone, Saxo’s global head of investment strategy, warned that any weakness in Nvidia’s report could have a significant impact on investor sentiment across the broader AI sector, as the report could signal whether the AI revolution can continue at its current rapid pace.
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