Stocks, dollar on back foot as trade war, Powell comments weigh

By Ankur Banerjee

SINGAPORE, April 17 (Reuters) - Asian stocks wavered on Thursday after Federal Reserve Chair Jerome Powell warned of the risk of slowing growth and rising prices due to tariffs, while the uncertainty around US trade policies kept the dollar rooted near three-year lows.

The spotlight stayed on technology shares after a bruising session on Wednesday in the wake of warnings from bellwethers Nvidia and ASML and ahead of earnings from Taiwan's TSMC.

Safe haven gold prices remained on the charge, notching up yet another record high in early trading on Thursday, while Powell's comments that US economic growth appeared to be slowing pushed Treasury yields lower.

In early Asia, stock markets were tentative across the region, after US stocks closed sharply lower. South Korea's benchmark index inched 0.4% higher, while Taiwan stocks fell 0.5%.

Japan's Nikkei rose 0.7% while the yen weakened as Japan kicked off talks with the US and President Donald Trump, in a surprise move to negotiate directly with the Japanese delegation, said there was "big progress".

Elsewhere, Powell said the Fed would wait for more data on the economy's direction before making any changes to interest rates.

"Powell is between a rock and a hard place," said Tom Graff, chief investment officer at Facet. "The Fed can't act proactively to stem any potential economic weakness, given that tariffs are likely to also cause inflation."

"They simply can't cut rates while inflation is on the rise. This is doubly the case given that inflation is already high."

All eyes will be on the earnings forecast of the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co, to gauge the health of the chip industry.

Chip stocks across the globe were pummelled on Wednesday after Dutch giant ASML warned that tariffs were increasing uncertainty around its outlook for 2025 and 2026.

Also weighing on sentiment was AI pioneer Nvidia warning of a $5.5 billion (R104-billion) hit after Washington restricted exports of its AI processor tailored for China.

"The chipmakers are very cyclical, so if we go into recession for any reason that's bad for chipmakers and we could see a contraction in demand," said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

"But there is also the implication that if there are tariff barriers or if there are short-term imposed costs, that could also lead to lower demand."

Chinese stocks fell in early trading as worries of an intensifying US -China trade war dented sentiment. The blue-chip stock index was down 0.5%, while Hong Kong's Hang Seng index rose 0.6%.

TRADE TALKS

Beyond chips, investor focus has been squarely on fast evolving trade policies under Trump as markets wait to see if new agreements are reached between the US and its trade partners.

The uncertainty has hamstrung the dollar, with investors dumping US assets, including Treasuries last week due to uncertainty over the erratic implementation of the trade levies.

The benchmark US  10-year Treasury yield was steady at 4.302% in Asian hours after dropping over 4 basis points in the previous session.

The euro was 0.33% lower at $1.1364 but was close to the three-year high it touched last week. The dollar index, which measures the US currency against six units, was slightly higher on the day at 99.562.

The yen touched a seven-month high earlier in the session before reversing to be 0.5% weaker at 142.60 per dollar after Japan's economy minister Ryosei Akazawa said foreign exchange had not been discussed at the trade talks in Washington.

In commodities, the spotlight has been on gold prices as it racked up yet another record high, going as high as $3,357.40 per ounce earlier in the session due to safe-haven flows. Gold was last at $3,337.4 per ounce.

Oil prices extended gains on the prospect of tighter supply. Brent crude futures rose 0.38% to $66.1 a barrel and US West Texas Intermediate crude was at $62.83 a barrel, up 0.58%.

(Reporting by Ankur Banerjee in Singapore, Additional reporting by Purvi Agarwal in Bengaluru; Editing by Jacqueline Wong)

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