Asia stocks rise as US-China tariff truce supports sentiment
Asian stocks rose on Tuesday with Japanese equities hitting a record high as the extension of the tariff truce between the U.S. and China boosted sentiment and focus turned to a key U.S. inflation report to gauge the future policy-rate path.
Australian shares slightly extended gains while the currency was choppy after the Reserve Bank of Australia expectedly cut its main cash rate by a quarter point to a two-year low of 3.60%.
The extension of a tariff truce between the world's two largest economies by another 90 days also buoyed sentiment in the region as it staved off triple-digit duties on Chinese exports to the United States. European futures pointed to a higher open, while Nasdaq futures were 0.15% higher.
In Asia, Japan's Nikkei climbed to an all-time high driven by sharp gains for tech companies and renewed optimism over trade with the United States.
China's blue-chip stocks were up 0.5% while Hong Kong's Hang Seng index was nearly flat. MSCI's broadest index of Asia-Pacific shares outside Japan rose slightly.
The U.S. and China have engaged in a tit-for-tat tariff duel throughout the year, culminating in trade talks in Geneva, London and Stockholm since May that focused on bringing retaliatory tariffs down from triple-digit levels.
"The tariff truce extension was largely priced in, which explains the muted reaction," said Marc Velan, head of investments at Lucerne Asset Management.
The latest truce extension clears the way for investors to focus on an action-packed week dominated by U.S. inflation data and the first summit between U.S. and Russian leaders since June 2021.
U.S. consumer price inflation data is due later on Tuesday and economists polled by Reuters forecast that month-on-month core CPI edged up 0.3% in July, faster than the 0.2% in the previous month.
"I think the Fed will go ahead and cut in September, partly due to political pressure and partly due to the softening labour data," said Mike Houlahan, director at Electus Financial in Auckland.
"But it'll be a conundrum for them (the Fed) if inflation starts to tick higher," Houlahan said.
U.S. President Donald Trump has repeatedly criticised Federal Reserve Chair Jerome Powell this year for not cutting interest rates, and despite speculation he could dismiss Powell, Trump said he would most likely stay on as Chair.
An upside surprise on inflation could add caution to market expectations of rate cuts by the Fed this year. Investors are currently pricing in at least two rate cuts in 2025 while JPMorgan expects four successive rate cuts starting in September.
In commodities, gold prices were last at $3,353, having dropped nearly 1.6% on Monday after Trump said there would be no tariffs on imported gold bars. [GOL/]
Oil prices were modestly higher ahead of the August 15 meeting between Trump and Russian President Vladimir Putin, aimed at negotiating an end to the war in Ukraine.
The talks follow increased U.S. pressure on Russia, raising the prospect of penalties on Moscow if a peace deal is not reached. [O/R]
"The market is not pricing in significant outcomes from the meeting, but any shift in geopolitical tone could have marginal impact, particularly for commodities and certain emerging market assets," said Lucerne's Velan.
Currencies were mostly calm in early trading, with the U.S. dollar steady against the euro and the yen. Elsewhere, bitcoin was modestly lower at $118,680 while etherum rose by 1% to $4290.
