Asian Stocks Rise After US, China Falls at Reopen: Markets Wrap
Asian stocks rose as investors navigated through ongoing US-China trade tensions and earnings reports from Wall Street’s major tech companies. However, Chinese shares edged lower, and Hong Kong equities fell, while stocks in Australia and Japan advanced. Meanwhile, US equity contracts also dipped as Alphabet Inc. and Advanced Micro Devices Inc. saw declines in extended trading. Treasury yields moved higher.
US-China Trade War: A New Chapter
The latest developments in the US-China trade war signal a more measured approach from Chinese President Xi Jinping compared to his stance during Donald Trump’s first term. Beijing’s swift yet tempered retaliation to the US’s 10% tariff suggests an effort to avoid a full-blown economic standoff. However, weaker-than-expected manufacturing activity data and the yuan’s depreciation are raising concerns over Chinese stocks’ performance.
China continued its efforts to stabilize the yuan, setting the daily reference rate at a level stronger than 7.2 per dollar amid increased depreciation pressure due to trade disputes. Goldman Sachs projects that the MSCI China Index could rise by 14% by year-end as Beijing rolls out anticipated policy stimulus.
Retaliation and Market Responses
Following a last-minute reprieve granted to Canada and Mexico, Trump’s tariffs on China officially took effect at midnight Washington time on Tuesday. In response, Beijing swiftly announced additional tariffs on approximately 80 US products, effective February 10. Furthermore, China launched an antitrust investigation into Google, tightened export controls on critical minerals, and added two US firms to its list of unreliable entities. Trump, in a statement, said there is no immediate rush to engage in discussions with Xi Jinping but would do so at an appropriate time.
Other Market Movements
Elsewhere in Asia, Japan’s central bank is expected to continue raising its benchmark rate beyond current market expectations, according to a former executive director at the Bank of Japan. This anticipation led to a rise in the yen, which advanced to around 154 per dollar on Tuesday.
In the commodities sector, oil prices edged lower amid fears that the prolonged trade war could negatively impact global economic growth. Meanwhile, US stock indexes rebounded after a wave of dip-buying, with Bloomberg’s gauge of the “Magnificent Seven” megacaps climbing by 1.7%.
Bottom Line
Despite trade tensions, Asian markets demonstrated resilience, with Australia and Japan leading the gains. However, China’s stock market remains under pressure due to ongoing economic concerns and a weakening yuan. Investors are keeping a close eye on potential policy stimulus from Beijing, which could play a crucial role in shaping market trends in the coming months.
Source: YahooFinance
