tock markets rallied in Asia on Tuesday as the shock of Donald Trump's controversial trade tariffs move last week gave way to hope that any measures will not be as bad as initially thought.
The tycoon sparked fears of a global trade war last week when he unveiled plans to put levies on imports of steel and aluminium.
The news sent markets into a tailspin from Sydney to New York, with investors already on edge over the prospect of rising interest rates and the end of crisis-era central bank stimuli.
However, after another down day in Asia Monday, investors in New York rushed back as they bet that Trump would not push through with extreme protectionist policies.
"Given the overwhelmingly negative response from industry leaders, international financial markets and even the furious backlash from loyal members of Trump's administration, there is growing optimism that perhaps significant exemptions will be forthcoming," said Stephen Innes, head of Asia-Pacific trade at OANDA.
"Investors remain guardedly optimistic."
However, he warned that "expecting for cooler heads to prevail might be far too optimistic given that President Trump promoted reforms of US trade policies as a cornerstone of his election campaign, and it's challenging to envision him backing down".
Trump campaigned during the presidential election on a protectionist "American First" platform, promising to pull out of global trade deals he said were hurting US workers.
Upbeat tone
All three main indexes on Wall Street rose between one and 1.4 percent and those gains filtered through to Asia on Tuesday.
Tokyo ended the morning more than two percent higher, while Hong Kong jumped 1.4 percent. Sydney, Seoul, Singapore and Taipei were all more than one percent higher, though Shanghai slipped 0.1 percent.
Attention will now turn to the release Friday of US jobs and wage growth data, which will give a fresh idea of the state of the world's top economy.
Worries about rising wages fuelling inflation and a sharp hike in interest rates has spooked investors since the start of February.
The more upbeat tone helped the dollar against the yen, which had rallied on its safe-haven status, though it slipped against the pound and euro.
The greenback also slipped against high-yielding currencies with the Australian dollar, Korean won and South African rand among the main winners.
Crude prices extended Monday's gains on reports of easing US stockpiles and news of a halt at an oilfield in Libya. However, investors remain uneasy about increasing US shale output and a possible end to a Russia-OPEC production cap deal.
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