Markets Regain Footing After Turbulent Sell-Off, Boosted by Robust US Factory Data
Financial markets across Asia-Pacific breathed a sigh of relief on Tuesday, with stocks, oil, and precious metals clawing back some of the steep losses suffered in the previous session's turmoil. The recovery was spurred by a rally on Wall Street, which itself was fueled by data showing U.S. manufacturing activity expanded in January at its fastest clip since 2022.
The week had begun on a sour note as the dollar surged following news that former President Donald Trump had selected Kevin Warsh—a former Federal Reserve governor viewed as notably hawkish—as his nominee to lead the central bank. Analysts said the move raised expectations for a policy stance more supportive of the U.S. currency, reversing its recent weakness. "The Warsh nomination signals a potential regime shift at the Fed, prioritizing currency strength and inflation vigilance," noted a macro strategist in Hong Kong.
The greenback's sharp rebound sent shockwaves through commodity markets. Gold and silver, which had soared to record highs in recent weeks, plunged at a breathtaking pace. Concurrently, easing tensions between the U.S. and Iran after Trump struck an optimistic tone on negotiations, combined with the stronger dollar, triggered a swift sell-off in crude oil.
However, the release of the robust U.S. manufacturing Purchasing Managers' Index (PMI), which indicated the sector's first expansion in a year, provided a timely catalyst for risk assets. Seoul's KOSPI led the regional advance, jumping around 5% to recoup most of Monday's losses, buoyed by continued enthusiasm for AI-related shares. Tokyo's Nikkei 225 gained over 3%, while Hong Kong, Shanghai, and other major benchmarks also edged higher.
"Monday's panic wasn't a verdict on the AI trade's fundamentals," explained Chung Hae-chang, an analyst at Daishin Securities. "It was a liquidity-driven scramble. When margin calls hit one corner of the market, it forces collateral adjustments elsewhere. Today's bounce is a natural retracement from that forced selling."
Traders also monitored developments in Washington, where Trump urged Congress to swiftly pass a spending bill to end a brief government shutdown. House Speaker Mike Johnson expressed optimism a deal was near.
Market Voices
Eleanor Vance, Portfolio Manager at Horizon Capital (Singapore): "This rebound shows the underlying resilience. The manufacturing data is a concrete positive, reminding everyone the U.S. economic engine is still humming. It gave investors a reason to look past the short-term political noise and refocus on growth."
Marcus Thorne, Independent Trader (London): "Calling this 'stability' is naive. We're just watching a dead cat bounce after a brutal margin call purge. The structural issues—a potentially radical Fed, overstretched tech valuations, and fragile geopolitics—haven't vanished. This is a selling opportunity, not a new bull leg."
Dr. Aisha Chen, Economics Professor at National University: "The market's violent reaction to a mere Fed nomination underscores how sensitive global liquidity remains to U.S. policy expectations. Tuesday's data provided a temporary anchor, but the fundamental debate about the pace of monetary normalization under a new chair is just beginning."
Rajiv Mehta, Chief Strategist at Pepperstone: "Order is slowly returning. We're seeing traders cautiously re-enter pro-risk positions. However, the metals markets remain a wild west. After such a violent move, confidence needs time to rebuild before we see sustained directional trends."
— Key figures around 0230 GMT —
- Tokyo - Nikkei 225: UP 2.9% at 54,201.01
- Hong Kong - Hang Seng Index: UP 0.4% at 26,875.15
- Shanghai - Composite: UP 0.5% at 4,035.60
- Dollar/Yen: DOWN at 155.43 yen
- West Texas Intermediate: UP 0.5% at $62.46/barrel
- Brent Crude: UP 0.5% at $66.64/barrel
- New York - Dow: UP 1.1% at 49,407.66 (close)