European, Asian Shares Rise: A Positive Sign for U.S. Market Rebound

The global stock markets have shown signs of recovery, with European and Asian shares rising on Friday, March 15, 2025. This rebound comes after a tumultuous week marked by significant selloffs, particularly in the U.S. market. The gains in Europe and Asia are not only a relief for investors but also a potential harbinger of a broader market recovery.

The STOXX 600 Europe added 0.6% a few hours into trading, and Germany’s DAX index climbed 0.6%. Both finished Tuesday at record highs. Japan’s Nikkei finished 1% higher while the Hang Seng in Hong Kong rose 0.1%. This rebound was driven by relief over the likely aversion of a U.S. government shutdown, as Senate Democrat Chuck Schumer signaled support for a Republican stopgap funding bill. This news boosted stocks in Asian trade, with U.S. stock futures rising sharply in response, including Nasdaq futures up more than 1% at one point and S&P 500 futures advancing 0.6%. EUROSTOXX 50 futures similarly gained 0.5% and FTSE futures gained 0.3%. DAX futures climbed 0.6%. Alvin Tan, head of Asia FX strategy at RBC Capital Markets, noted, "For today, at least, this news from Congress is positive for market sentiment at this point."

The recent gains in European and Asian stock markets reflect a shift in investor sentiment following a period of significant volatility. The 0.7% gain for Japan’s Nikkei and the 2.1% advance for the Hang Seng in Hong Kong are encouraging signs, suggesting that investor confidence may be returning after the S&P 500’s drop on Thursday. The rebound in these markets indicates that global investors are seeking opportunities in equities, which could translate into a similar rebound in the U.S. market as investor sentiment improves.



However, the escalating trade tensions and the latest tariff threats from U.S. President Donald Trump have left nervous investors seeking safe-haven assets like gold, which reached a record high of $2,993.80 an ounce on Friday. This shift towards safe-haven assets reflects the ongoing uncertainty and risk aversion in the market, which could impact the U.S. market rebound as investors weigh the potential impact of trade policies on economic growth and corporate earnings.

The current rise in European and Asian shares is driven by several specific factors, including geopolitical events and economic indicators. One key factor is the relief over the likely aversion of a U.S. government shutdown, which boosted stocks in Asian trade. Senate Democrat Chuck Schumer's announcement that his party would provide the necessary support for a Republican stopgap funding bill signaled positive market sentiment. This was reflected in the sharp rise of U.S. stock futures, with Nasdaq futures up more than 1% and S&P 500 futures advancing 0.6%. Similarly, EUROSTOXX 50 futures gained 0.5% and FTSE futures gained 0.3%, while DAX futures climbed 0.6%. Alvin Tan, head of Asia FX strategy at RBC Capital Markets, noted that "For today, at least, this news from Congress is positive for market sentiment at this point."

Another significant factor is the escalating global trade tensions, which have led to a surge in safe-haven assets like gold. The latest tariff threats from U.S. President Donald Trump, including a 200% duty on European wine and spirits, have heightened market volatility. Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho, stated, "Trump is making it very clear that if anyone were to retaliate, his counter-escalation is going to be even sharper." This has led to a record high for gold at $2,993.80 an ounce, indicating investor nervousness and a shift towards safe-haven assets.

Economic indicators also play a crucial role. The soft inflation report in the U.S., with the consumer price index increasing 0.2% month-on-month in February, has eased concerns about a looming recession. This has led to a rebound in Asian-Pacific markets, with Australia's S&P/ASX 200 starting the day 0.20% higher and Japan's Nikkei 225 set to open higher. The tech sector, which had suffered a scare at the start of the week due to concerns about China's DeepSeek AI model, bounced back with top performers including Nvidia, AMD, Meta Platforms, and Tesla.



These factors suggest that future market trends may be influenced by continued geopolitical developments and economic data releases. The resolution of trade tensions and positive economic indicators could further boost market sentiment, while escalating conflicts or negative economic data could lead to increased volatility and a shift towards safe-haven assets.

The recent developments in global trade tensions, particularly the tariff threats by U.S. President Donald Trump, have had a significant impact on the performance of European and Asian markets. On March 15, 2025, Trump announced that he would hit imports of European wine and spirits with duties of 200% if the EU did not remove retaliatory surcharges on American whiskey and other products. This escalation in trade tensions led to a steep selloff on Wall Street and confirmed that the S&P 500 was in a correction, just a week after the Nasdaq confirmed the same. The latest developments sparked Thursday's steep selloff on Wall Street and the confirmation that the S&P 500 was in a correction, just a week after the Nasdaq confirmed the same. "Trump is making it very clear that if anyone were to retaliate, his counter-escalation is going to be even sharper," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. The latest developments sparked Thursday's steep selloff on Wall Street and the confirmation that the S&P 500 was in a correction, just a week after the Nasdaq confirmed the same. "I think Trump 2.0 is nothing like Trump 1.0. This time, the president seems prepared to let U.S. markets and the economy suffer while he implements his 'America first' goals," said Michael Strobaek, global chief investment officer at Lombard Odier. Typical safe haven assets like gold have meanwhile been beneficiaries of the escalating trade war, as the yellow metal reached a record high of $2,993.80 an ounce on Friday. It was on track to gain 2.6% for the week. Elsewhere, Japan's Nikkei rose 0.8%. A surge in consumer shares pushed Chinese stocks higher on Friday, after the northern Chinese city of Hohhot announced big cash rewards to boost birth rates. Investors were also awaiting a press conference next week by officials from Beijing's top planning agency and elsewhere for additional measures to boost domestic consumption. Hong Kong's Hang Seng Index jumped 2.4%, while China's CSI300 blue-chip index advanced 2.3%. The Shanghai Composite Index rose 1.7%. The dollar regained some lost ground on Friday due to safe haven flows, but was not too far off recent lows as worries of an impending U.S. recession and brewing trade tensions kept pressure on the greenback. The euro last traded 0.04% lower at $1.08465, while sterling fell 0.03% to $1.29475. The euro has drawn additional support from Germany's fiscal reset plan involving a 500 billion euro fund for infrastructure and sweeping changes to borrowing rules to revive growth and ramp up military spending in Europe's largest economy. Germany's outgoing lower house of parliament will vote on the measures on March 18 before the formation of a new parliament on March 25. Next week will also see a slew of central bank meetings including the U.S. Federal Reserve, as investors await further guidance on the rate outlook amid uncertainty over Trump's trade policies and their impact on U.S. growth and inflation. "Our assessment is the direction of travel is consistent, rates will go lower. It's just a question of timing, when they get to do it," said Mizuho's Varathan. "I think eventually, the tariffs will be an inconvenience, not an impediment to the Fed cuts, because even if the prices go up... it is a negative demand shock and people are worse off, not better off." The dollar was last up 0.5% against the yen at 148.50 , but was set for a slight weekly loss against the Japanese currency as bets for more Bank of Japan (BOJ) rate hikes ramp up. The BOJ also meets next week. In commodities, oil prices were higher after falling in the previous session. Brent futures rose 0.67% to $70.35 a barrel. U.S. West Texas Intermediate crude futures added 0.75% to $67.05 per barrel. - Reuters.

To mitigate these risks, investors can employ several strategies:

1. Diversification: Investors can diversify their portfolios by allocating funds to different asset classes and regions. This can help reduce the impact of trade tensions on their overall portfolio performance. For example, investing in safe-haven assets like gold, which reached a record high of $2,993.80 an ounce on March 15, 2025, can provide a hedge against market volatility.

2. Sector Rotation: Investors can rotate their investments into sectors that are less affected by trade tensions. For instance, consumer shares in China saw a surge after the northern Chinese city of Hohhot announced big cash rewards to boost birth rates, pushing Chinese stocks higher.

3. Currency Hedging: Given the volatility in currency markets due to trade tensions, investors can use currency hedging strategies to protect their investments. For example, the dollar regained some lost ground on March 15, 2025, due to safe-haven flows, but was not too far off recent lows as worries of an impending U.S. recession and brewing trade tensions kept pressure on the greenback.

4. Monitoring Central Bank Policies: Investors should closely monitor central bank meetings, including those of the U.S. Federal Reserve and the Bank of Japan, for guidance on rate outlook and potential policy changes in response to trade tensions. For instance, next week will see a slew of central bank meetings, including the U.S. Federal Reserve, as investors await further guidance on the rate outlook amid uncertainty over Trump's trade policies and their impact on U.S. growth and inflation.