Asian equities started Wednesday in a cautious tone, showing narrow movements across regional markets. While Japan saw mixed signals, Australia’s indices dipped slightly, reflecting an uncertain trading environment. This came after US benchmarks erased their year-to-date losses, lifted by softer inflation data and improving sentiment around the US-China trade war.

Investors across Asia are eyeing key earnings announcements from Chinese tech giants—Tencent Holdings Ltd. is set to release its results today, followed by Alibaba Group Holding Ltd. tomorrow. These updates are expected to provide critical insights into the health of China’s tech sector and possibly influence regional trading trends.

US Market Boosted by Tech Rally and Trade Optimism

On Wall Street, tech stocks led a strong rebound, with the Nasdaq 100 rising 1.6% and the S&P 500 closing 0.7% higher. The Magnificent Seven index, which includes top megacap stocks like Apple and Microsoft, surged by 2.2%, showcasing renewed investor confidence in the tech space.

The rally was fueled by Nvidia and AMD, which gained after reports confirmed that they would supply semiconductors to Saudi firm Humain for a new data-center project. Additionally, the US is considering a deal to allow the UAE to import over a million Nvidia chips, potentially softening the Biden-era restrictions on AI chip exports.

This signals a shift in US policy, as the Trump administration moves to overhaul semiconductor export regulations, aiming to balance national security with economic opportunity.

Trump Projects Massive Investment from Saudi Arabia

Adding to the optimism, former US President Donald Trump claimed that Saudi Arabia would invest $1 trillion in the US economy, calling it an "explosion of investment and jobs." Though details of this commitment remain vague, such announcements boost investor morale, especially in volatile global conditions.

Cooling US Inflation Brings Relief

Markets were further supported by US inflation data, which showed a smaller-than-expected increase in April. Prices for clothing and new vehicles remained stable, indicating that companies aren’t yet passing on higher tariffs to consumers.

This was seen as a positive sign, reinforcing that the impact of the trade war on consumer pricing remains limited for now. With this muted inflation, analysts believe the Federal Reserve may maintain its current interest rate stance, or possibly delay any aggressive tightening.

Trade Truce with China Lifts Sentiment

Over the weekend, a temporary agreement between the US and China to de-escalate trade tensions injected a fresh dose of optimism into global markets. This development led JPMorgan Chase to revise its forecast, withdrawing its earlier prediction of a US recession in 2025 and instead raising its growth outlook.

Derivatives traders are now pricing in two interest rate cuts by the Fed later this year, although some major banks expect the first cut only by December. The situation remains fluid, and any shift in inflation data or trade dynamics could affect this trajectory.

Technical Indicators Suggest a Bullish Trend

From a technical perspective, the S&P 500 has broken above its 200-day moving average, a key indicator that typically signals the end of a bear market and the beginning of a new upward trend. According to Macro Risk Advisors’ John Kolovos, there is now no major resistance level until the S&P 500 reaches its all-time high of 6,144.

This bullish breakout increases the likelihood that future pullbacks will be met with strong buying interest, changing trading strategies for institutional investors.

What Lies Ahead for Asian Investors

For Asian investors, the next catalysts will be:

• Tencent and Alibaba earnings, which will indicate the strength of China’s digital economy.

• Progress on US semiconductor policy, which could benefit or hurt chip manufacturers across the region.

• Further trade developments, especially around US-China relations, which remain the backbone of investor sentiment in Asia.

Despite the positive cues from the US, Asian markets remain cautious, reflecting regional uncertainties and the wait-and-watch stance ahead of major earnings and policy updates.

Conclusion

In summary, global markets are at a turning point, buoyed by a combination of cooling inflation, trade de-escalation, and strong tech earnings. The rally in US equities is now spilling over into Asia, though with measured optimism.

As semiconductor deals unfold and earnings season progresses, investors are advised to stay alert to both macroeconomic data and policy shifts, especially in the US and China.

The market may be poised for further upside, but volatility is likely to persist, particularly with geopolitical and regulatory uncertainty still in play. Traders and investors alike will be watching closely for any new developments that could shape global equities in the coming weeks.

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