Most Asian indexes rose as President Donald Trump left the door open for additional trade talks, providing a reprieve to markets after imposing new tariff rates on several countries.
Shares in South Korea jumped more than 1.4 per cent and the Nikkei-225 index advanced 0.2 per cent. The MSCI regional stock benchmark edged up 0.1 per cent, after swinging between small gains and losses earlier Tuesday. The won strengthened, while a gauge of the dollar dipped 0.2 per cent. The euro gained on a report the US offered a deal to the European Union with a 10 per cent tariff level.
Yields on Japan’s 30-year government bonds extended their advance. The Australian dollar spiked higher after the central bank surprised investors by keeping interest rates unchanged.
Late on Monday, Mr Trump said he was still open to negotiations and pushed off increased duties until at least August 1st, easing concerns for markets. Stocks have recovered from their April plunge - when sweeping levies were first announced - fuelled by expectations that the tariff deadline will be extended, based on Mr Trump’s pattern of threatening first and backing down later.
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“Investors are looking past the latest tariff announcements, seeing them as a tactic to accelerate negotiations, rather than the final word of where duties will ultimately land,” said Frederic Neumann, HSBC’s chief Asia economist.
On Monday, Mr Trump released the first in a series of tariff warning letters, just two days before agreements are due on countries facing his April 2nd so-called reciprocal levies. Few nations successfully negotiated deals in the short time given. In the interim, Mr Trump announced framework agreements with the United Kingdom and Vietnam and a trade truce with China.
Meanwhile, Indian officials familiar with the matter said the nation had made its best offer on trade and the fate of an interim deal now lies in the hands of Trump.
“More twisting and turning from Trump,” said Nick Twidale, chief market analyst at AT Global Markets. “We will see more of this over the next couple of days with the US flip flopping on negotiation tactics. The market has to react to individual updates and this is what we are seeing in the Asian session this morning.”
So far, the US economy has held up under the threat of a spiraling global trade war. Hiring is healthy and inflation has remained tame. The Federal Reserve is wary about tariffs and wants to see how they feed through to output in the next few months. The S&P 500 hit a record high last week, ahead of the July 9 deadline imposed by Mr Trump.
“The market had already priced in the possibility that there would be an extension and it seemed like there wasn’t much fear given how low the implied volatility was,” said Andrew Hiesinger, founder of Quant Data in New York. “It basically just tells me that the market is cautious, but I don’t see a lot of panic right now.”
Meanwhile, Japan’s super-long bonds extended their recent declines Tuesday, pushing the yield on 30-year securities toward a record high as political risks continue to cast a shadow over the nation’s financial markets. - Bloomberg
