JAKARTA — Global equity markets displayed divergent responses to a US appeals court ruling that overturned a federal court decision regarding former President Donald Trump’s tariff policy, as well as to expectations of rate cuts by the Federal Reserve.

Wall Street recorded modest gains following the US appeals court’s decision to reinstate the Trump-era tariffs that had previously been blocked by a federal court.

At the close of trading on Thursday night (29/5) local time, as reported by Bloomberg, all three major US indices ended higher.

The S&P 500 rose 0.37% to 5,900.05, the Nasdaq 100 gained 0.22% to 5,199.30, and the Dow Jones increased by 0.25% to close at 42,246.00.

However, the same momentum was not observed across Asia. Investors are believed to remain cautious, particularly amid concerns that China may retaliate against the US tariff policy.

Japan’s Nikkei 225 fell by 0.3%, South Korea’s Kospi declined 0.4%, and China’s SSE Composite Index traded flat.

In Hong Kong, the Hang Seng Index (HSI) dropped 283.81 points to 23,289.77, while the Shenzhen Index fell 86.58 points to 10,040.33.

Europe followed a similar path. Germany’s DAX Index slipped 0.44% to 23,933.23, and France’s CAC 40 weakened 0.11% to 7,779.72.

European investors are concerned that escalating global trade tensions could undermine their export prospects, particularly to US and Asian markets, according to Moneycontrol Global Indices.

India also recorded losses. The Sensex fell by 0.5%, or around 300 points, while the Nifty 50 dropped 0.6% to 24,750. The sharpest declines were seen in the information technology and metals sectors, despite continued inflows of foreign capital.

Three key factors are currently driving market dynamics:

  • First, uncertainty over US tariffs.
  • Second, expectations of rate cuts by the Fed. Rising yields on US government bonds signal that markets anticipate the Federal Reserve will cut interest rates twice this year. This optimism has increased investor appetite for risk assets such as equities.
  • Third, the threat of a prolonged trade war. Major US trading partners, including China, are weighing retaliatory measures. These tensions risk slowing global economic growth.

On the other hand, a recent report by Morgan Stanley suggests that 2025 will be a transitional year for financial markets.

While volatility is expected to remain elevated, opportunities for accumulation remain open for long-term investors willing to take risks in a sideways-trading market. (EF/ZH)