US factory activity spike boosted Wall Street sentiment and economic outlook
Asian stocks climbed after their steepest two-day drop since April as markets found footing following sharp swings in gold and silver that sent ripples across assets. The precious metals rose in early trading.
The MSCI Asia Pacific Index climbed over 1.5%, with technology shares leading. Stocks in South Korea — a poster child for artificial intelligence and one of the world’s best-performing markets this year — recovered after plummeting 5.3% on Monday. Nasdaq 100 Index futures rose 0.7% after Palantir Technologies Inc. posted a stronger-than-expected sales outlook.
Gold and silver climbed, clawing back some losses after the abrupt unwinding of a record-breaking rally that had driven prices sharply down in the past two sessions. As sentiment improved, Bitcoin rose to trade close to $79,000. The Bloomberg Dollar Spot Index was a touch weaker after two days of gains following President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chief.
Unlike the volatile selloff during the Asian session on Monday, Wall Street gauges rose. A demand-related spike in US factory activity was the catalyst for the shift in mood, offering an upbeat signal for the economy and corporate profits. Sustained growth would help provide reassurance that manufacturing is on the mend after languishing the past three years.
“Manufacturing activity seems to be emerging from a cold winter,” said Brian Jacobsen at Annex Wealth Management. “We’ve seen signs of life before, only for manufacturing to dip again, but with new orders growing, maybe this revival is real.”
Elsewhere, Indian assets will also be in focus after Trump said he will slash tariffs on India to 18% after Prime Minister Narendra Modi agreed to stop buying Russian oil, easing tensions between the two countries.
Investors will also be focused on Australia with the country’s central bank expected to raise borrowing costs by 25 basis points when it hands down an interest rate decision later Tuesday.
Despite the brighter mood on Wall Street, a gauge of US tech megacaps underperformed on Monday. Walt Disney Co. sank after a tepid forecast. Oracle Corp. is selling $25 billion of investment-grade bonds to help finance infrastructure that powers artificial intelligence projects.
But most of the market focus was on precious metals, which clawed back some losses on Monday after another heavy selloff in Asian hours.
Precious metals had surged to records last month in a rapid ascent that caught even seasoned traders by surprise. Investors piled into gold and silver on renewed concerns about geopolitical upheaval, currency debasement, and threats to the Fed’s independence. A wave of buying from Chinese speculators supercharged the rally.
That flipped on Friday as the US dollar rebounded and the precious metals slid after Trump said he’d nominate Warsh for the Fed chief post.
Markets see Warsh as more inclined than other candidates to fight against rising price pressures. That stance may translate into monetary policy aiding the dollar, eroding the so-called debasement trade that had caused gold to soar.
“Commodity price action is more about positioning shakeout of weak or leveraged hands than a change in the fundamental story,” said Darrell Cronk at Wells Fargo. “It’s a market to watch for vulnerabilities and extremes.”
