A look at the day ahead in European and global markets from Kevin Buckland

Listening to President Trump on Tuesday, it's as if all the vitriol towards Fed boss Jay Powell - the threats, the name calling - was some crazy misunderstanding. Trump now says he had "no intention of firing him" and was just gently angling for a rate cut or two.

In the same news conference, Trump said the exorbitant levies on Chinese goods following a rapid tit-for-tat trade war escalation - so high that the actual numbers became irrelevant - will soon be "substantially" lower.

Market reaction was immediate, as investors rushed back into the dollar after days of heavy selling - dubbed the "sell America" trade - that pushed the currency to multi-year lows against the likes of the euro and Swiss franc.

There was a scramble back into Wall Street stocks as well, which lifted share markets around Asia and looks set to buoy Europe, too.

With just a week to go until Trump completes the symbolic 100th day of his second term in the Oval Office, you might think market players had got used to his relentless string of sudden pivots and abrupt about-faces.

Instead, there's a lot of head-scratching and multiple pet theories about just what is happening behind closed doors.

Many analysts conjecture that, with the dollar in free fall, Treasury Secretary Scott Bessent stepped in again to be the voice of reason, explaining just how disruptive for markets any interference with an independent central bank would be. He is also thought to have done so during the Treasury market meltdown at the start of the month that forced a reprieve from "Liberation Day" tariffs.

Whatever the case, many analysts insist that some concrete trade agreements need to be reached before any real stability returns to the markets.

The Trump administration lined up old ally Japan for the first round of negotiations, which could set a precedent for other trading partners to follow.

A source told Reuters the two sides are moving closer to an interim agreement but the thornier issues are being put off.

Bessent backed up Trump's statement that a de-escalation is likely with China but described future negotiations with Beijing as "a slog" - and the two sides haven't yet agreed to even start talking.

For today, at least, the winds of change appear to be blowing in a favourable direction for markets.

And it would be remiss not to mention another shift in the Trump administration that investors are cheering: Tesla, X and SpaceX boss Elon Musk told analysts he will be significantly cutting back on his chainsaw-wielding work at DOGE to concentrate on running his own companies.

Tesla shares spiked 5.5% after-hours, although that's only a small dent in the nearly 50% drop in the stock from its December peak.

Key developments that could influence markets on Wednesday:

-Flash PMIs from UK, Germany, France

-Euro zone trade balance

-Fed Governor Waller, St Louis Fed President Musalem, Cleveland Fed President Hammack and Chicago Fed President Goolsbee speak

-IMF/World Bank meetings continue in Washington

--BoE chief economist Pill speaks at Leeds University Business School

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(By Kevin Buckland; Editing by Edmund Klamann)