SYDNEY, May 29 (Reuters) - Asian shares and Wall Street futures experienced a significant surge in Asia on Thursday, following a pivotal decision by a U.S. federal court that blocked President Donald Trump's proposed Liberation Day tariffs. This ruling not only sent the dollar rising against safe-haven currencies but also injected a wave of optimism into the financial markets.
The lesser-known Manhattan-based Court of International Trade concluded that President Trump exceeded his authority by imposing a blanket set of duties on imports from U.S. trade partners, which were set to take effect on April 2. The White House promptly announced its intention to appeal the court's decision, indicating that it could escalate the matter to the Supreme Court if necessary. However, this ruling has raised hopes that Trump may reconsider implementing the highest levels of tariffs he had previously threatened.
According to Kyle Rodda, a senior financial analyst at Capital.com, it has long been argued that the emergency powers utilized by Trump to enforce these tariffs might be unconstitutional. The authority to enact tariffs is believed to reside with Congress. If the markets have their way, the judicial system could delay and potentially prevent these tariffs from taking effect, thus alleviating a significant risk and enhancing market sentiment.
Moreover, this decision could lead U.S. trading partners to postpone ongoing trade negotiations with the White House, as they may prefer to wait for a resolution on this legal case. However, analysts at Goldman Sachs pointed out that the ruling does not inhibit sector-specific levies, and there are alternative legal pathways available for Trump to impose both broad and targeted tariffs.
This legal ruling is viewed as a setback for the administration’s tariff agenda and amplifies uncertainty in the market, although it may not drastically alter the final outcomes for most significant U.S. trading partners. Analyst Alec Phillips noted this in a recent report, highlighting the broader implications of such court decisions.
The ripples from this court ruling were felt across global markets, with EUROSTOXX 50 futures climbing 1.3%. Additionally, FTSE futures saw a rise of 0.8%, while DAX futures increased by 1.1%. In the tech sector, NVIDIA demonstrated resilience, forecasting robust revenues for the current quarter, which led to a 4.4% rise in its shares after hours. This positive news served to counterbalance a report from the Financial Times indicating that the White House had ordered U.S. companies providing semiconductor design software to halt services to Chinese entities.
In currency markets, the court's decision impacted traditional safe-haven currencies, resulting in the dollar appreciating by 0.7% against the Swiss franc, bringing it to 0.8327. The dollar also gained 0.7% against the Japanese yen, reaching 145.86 yen, while the euro saw a decline of 0.4%, trading at $1.1245.
In the bond market, yields on 10-year U.S. Treasuries rose by 3 basis points to reach 4.51%. Furthermore, market expectations regarding a potential Federal Reserve rate cut have diminished significantly. Minutes from the last Federal Reserve meeting revealed that nearly all participants expressed concerns about the risk of inflation becoming more persistent than anticipated due to Trump's tariffs. Currently, the likelihood of a rate cut in July is pegged at just 22%, with September's chances around 60%, marking a notable shift from earlier projections.
In commodity markets, gold prices dipped 0.5% to $3,271 per ounce. Meanwhile, Brent crude oil prices rose by 96 cents to $65.87 per barrel, and U.S. crude futures climbed by $1, reaching $62.84 per barrel.
This article includes additional reporting by Ankur Banerjee in Singapore and Stella Qiu in Sydney, with editing by Sam Holmes and Lincoln Feast.
