Asian stocks rose as concerns about a snap election in Japan fuel potential stimulus expectations
Global stock markets showed mixed performance on Wednesday, with U.S. indices extending recent pullbacks, European markets stabilizing cautiously, and Asian benchmarks inching higher amid currency concerns. Investors navigated uncertainty from upcoming bank earnings, Greenland talks, inflation data, and geopolitical tensions, while oil prices weighed on sentiment.
Wall Street stock indexes closed down on Tuesday due to a significant sell-off in the financial sector and increasing geopolitical tensions, which overshadowed inflation data that matched economists’ expectations. After hitting record highs earlier in the week, the major averages pulled back as investors reacted to the beginning of the fourth-quarter earnings season and raised concerns about the Federal Reserve’s future actions.
JPMorgan Chase unofficially kicked off the earnings season with a report that initially seemed strong, revealing an adjusted net income of $14.7 billion, or $5.23 per share. However, the bank’s stock dropped by 4.2 percent by the end of the trading day. This decline was driven by a one-time charge related to its acquisition of Apple’s credit-card partnership from Goldman Sachs, along with executive warnings about a proposed federal cap on credit-card interest rates. This negative sentiment spread throughout the financial sector, causing Visa to fall 4.5 percent and Mastercard to decline 3.8 percent, contributing to an overall 1.8 percent drop in the S&P 500 financial sector.
Economic data offered a brief respite earlier in the session. The December Consumer Price Index (CPI) revealed that annual core inflation rose to 2.7 percent, aligning with market expectations and initially indicating that the Federal Reserve might still pursue interest rate cuts later this year. However, this optimism was tempered by ongoing political uncertainty, particularly related to a criminal investigation into Fed Chair Jerome Powell, which has raised concerns about the central bank’s independence.
The airline industry encountered substantial challenges during Tuesday’s session. Delta Air Lines experienced a 5.6 percent drop in its shares after issuing a 2026 profit forecast that did not meet analyst expectations. This disappointing guidance weighed on the broader industry, causing United Airlines and American Airlines to both lose around 3 percent of their value. In contrast, the technology sector buoyed the Nasdaq, with chipmakers Intel and AMD rising by 7.3 percent and 6.4 percent, respectively, following several analyst upgrades.
Global instability added further pressure on equities as oil prices rose. Growing anti-government protests in Iran, along with President Trump’s threats to impose 25 percent tariffs on any nation conducting business with the country, drove Brent futures up to $64.16 a barrel and West Texas Intermediate nearing the $60 mark.
By the end of trading, the Dow Jones Industrial Average declined by 398.21 points, or 0.80 percent, closing at 49,191.99. The S&P 500 fell 13.53 points, or 0.19 percent, finishing at 6,963.74, while the Nasdaq Composite slipped 24.03 points, or 0.10 percent, to settle at 23,709.87.
Asian stocks reached a record high on Wednesday, driven by gains in Japanese shares, as investors prepared for a potential election in Japan that might result in increased stimulus. Meanwhile, concerns about central bank independence and mild U.S. inflation data affected currency markets.
Increasing geopolitical tensions pushed silver prices above $90 per ounce for the first time, with the metal rising 27 percent in the first nine trading days of the year. Gold prices also reached yet another record high following a strong performance in 2025.
The Japanese yen dropped to its lowest level since July 2024, trading at 159.29 per dollar, as concerns about potential market intervention re-emerged following local media reports that Prime Minister Sanae Takaichi was contemplating a snap lower house election on February 8.
The weak yen and the possibility of increased stimulus propelled the Nikkei up more than 1 percent to a record high and caused Japanese government bonds to decline. This “Takaichi trade” seems to have gained momentum this week as investors express concerns about the country’s fiscal stability.
Chinese stocks changed direction to trade 0.15 percent lower after stock exchanges in China unexpectedly tightened margin requirements to cool the overheated equity market. Blue-chip stocks reached a 10-year high on Tuesday.
Investors largely overlooked trade data showing that China recorded a trade surplus of nearly $1.2 trillion in 2025, driven by strong exports to markets outside the U.S.
MSCI’s broadest index of Asia-Pacific shares rose 0.5 percent, reaching a new record high. U.S. stock futures were down 0.19 percent, while European stock futures increased slightly by 0.1 percent, indicating a subdued market opening.
Tuesday’s data indicated moderate underlying U.S. inflation pressures from the previous month. Economists noted that this suggested a slowdown in the pass-through of import tariffs to prices, keeping rate cuts a possibility later this year, although the general expectation was for the Fed to maintain its current stance this month.
Traders are anticipating at least two rate cuts this year, with adjustments not expected until after Jerome Powell concludes his term as Fed chairman in May.
The dollar index, which measures the performance of the greenback against a basket of currencies including the yen and the euro, was last unchanged at 99.184 after a 0.2 percent increase in the previous session.
The dollar faced a setback at the beginning of the week as investors expressed concerns about the Fed’s independence under Trump, particularly after the U.S. Department of Justice indicated it might indict Powell in relation to a renovation project.
This resulted in a strong condemnation from Powell and former Fed chairs. Later on Tuesday, central bank officials worldwide released a coordinated statement expressing their support for him.
India’s equity benchmarks slipped on Wednesday as foreign investor selling persisted amid concerns about trade tensions, rising crude prices, and geopolitical issues. Meanwhile, metal stocks surged, reflecting the increase in global metal prices.
The Nifty 50 declined by 0.11 percent to 25,704, while the Sensex dropped 0.16 percent to 83,474.55 as of 10:11 a.m. IST.
European stocks ticked up on Wednesday as investors turned their attention to the upcoming discussions regarding Greenland’s future.
At 03:05 ET (08:05 GMT), the DAX index in Germany increased by 0.1 percent, the CAC 40 in France advanced by 0.4 percent, and the FTSE 100 in the U.K. climbed by 0.2 percent.
Geopolitical concerns remain at the forefront of investor sentiment, with attention on Wednesday directed toward a meeting between U.S. Secretary of State Marco Rubio and officials from Greenland and Denmark, in light of U.S. President Donald Trump’s ongoing interest in “acquiring” the semi-autonomous Danish territory.
Trump has consistently stated that Washington needs to acquire Greenland to prevent Russia or China from taking control of the strategically located, mineral-rich Arctic territory.
Greenland and Denmark have stated that Greenland is not for sale, yet Trump has not dismissed the possibility of acquiring it by force.
There are few European economic reports to consider on Wednesday, so attention will shift back to the U.S. data releases.
Shifting to the European corporate sector, attention will be on BP (LON:BP) after the energy giant announced anticipated impairments of $4 billion to $5 billion in the fourth quarter, primarily linked to its energy transition businesses, along with weak oil trading performance.
The oil giant is working to refocus on its core oil and gas operations, abandoning its previous plans to transition into a green energy company.
In other news, Pearson reported an 8 percent increase in sales growth for the final quarter of the year, with the British education company projecting an operating profit rise of approximately 6 percent for 2025.
On Wall Street, more bank earnings will be released later in the session, with reports from Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC), following JPMorgan Chase (NYSE:JPM) announcing a quarterly profit that surpassed analysts’ expectations on Tuesday.