Asian markets traded in a mixed pattern Tuesday as global investors reacted to the latest in trade developments and shifting U.S. Treasury yields.
Regional markets ended last week on the back foot on fears of fresh tariffs and economic slowdowns. Yet on Tuesday, relief emerged after U.S. President Donald Trump held off from imposing punishing tariffs on European Union goods, lifting some of the immediate pressure.
The MSCI Asia-Pacific index, excluding Japan, fell 0.4%. Hong Kong’s Hang Seng Index, on the other hand, inched 0.4% higher, in a hesitant sign of optimism. The Nikkei in Japan came barely off an early closing low, as investors awaited domestic policy moves and economic data.
President Trump, following discussions with European Commission President Ursula von der Leyen over the weekend, said the 50 percent tariffs would now be delayed until July 9. The announcement provided a momentary reprieve to financial markets, especially in Asia, where doubts about trade can have cascading effects.
European stock markets were higher, with the STOXX index up 0.5%. In the U.K., the FTSE 100 rose 0.8%, reaching a three-week high after British markets were closed Monday. American markets, closed for a public holiday, welcomed futures with gapped higher bids. S&P futures rose 1.4 percent, as investor confidence continued to build that the latest threat of tariffs also may not come to pass.
In the bond markets, 30-year U.S. Treasury yields fell 8 basis points to 4.96 percent, the biggest one-day move since mid-April. This move was in step with the decline in long-dated Japanese bond yields, which tumbled by almost 20 basis points. The decrease followed reports that Japan was considering cutting sales of such bonds to help control a surge in yields.
Carsten Brzeski of ING Research said a growing concern among investors is that debt is increasingly being built up at a serious price, particularly in places like Japan and the U.S., where already-high debt levels have continued to increase.
In the meantime, investors are turning their attention to the earnings report from Nvidia, set for Wednesday. Analysts expect revenue to increase by 66%, underpinning strong demand for the AI sector. Moreover, speeches from U.S. Federal Reserve officials as well as U.S. core PCE inflation due on Friday will be watched to gauge sentiment.
“The attraction of the dollar as a safe haven does not appear to be so reliable,” Julius Baer’s Meier said as investors increasingly turn to gold and others assets.
The dollar rose 0.4% against a basket of currencies in the currency market. However, despite the gain, it remains on track for its fifth consecutive monthly decline, marking its longest losing streak since 2017. The euro slipped 0.4%, staying near a one-month high, while the yen weakened by 0.6% to 143.71 per dollar.
