Asian Shares Edge Up, Japanese Bond Yields Rise: Markets Wrap
Shares in Australia and Japan rose while those in South Korea retreated at the open Tuesday. The S&P 500 eked out a gain as Trump indicated he’s open to trade talks.
Asian equities followed the US in posting a modest gain as traders brushed off President Donald Trump’s latest tariff threats as bargaining tactics that are unlikely to derail global trade.
Shares in Australia and Japan rose while those in South Korea retreated at the open Tuesday. The S&P 500 eked out a gain as Trump indicated he’s open to trade talks. Bitcoin slipped below $120,000, after surging to a record Monday. Oil held a drop on Trump’s plan to pressure Russia.
Japan’s 10-year government bond yield climbed to its highest level since 2008 amid concerns about fiscal spending ahead of an upper house election on July 20. Yields for long-term debt from Japan and Germany to the UK and France rose on Monday on growing worries over widening fiscal deficits.
Stocks have rallied from their slump in April, when tariffs were announced, to record high levels this month as investors speculate the levies won’t significantly harm the US economy and company earnings. That optimism faces a test Tuesday as China releases gross domestic product data and investors read the US inflation print.
“Earnings growth is slowing, tariffs are starting to bite, and geopolitical risk remains elevated. Yet, stock valuations reflect a lot of optimism,” said Jeff Buchbinder and Adam Turnquist, strategists at LPL Financial, in a note Monday. “While trade uncertainty should start to dissipate in the second half, the path to clarity may be bumpy.”
Trump also threatened to impose secondary levies of 100% on Russia if it doesn’t end hostilities with Ukraine. That’s after he unleashed more tariff threats at the weekend, declaring a 30% rate for Mexico and the European Union, and informing key trading partners of new rates that will kick in on Aug. 1 if they can’t negotiate better terms.
“We view the latest move from the White House as a negotiating tactic, and maintain our base case that the US effective tariff rate will settle around 15%, which we believe will allow the S&P 500 to rise further over the coming 12 months,” said Mark Haefele at UBS Global Wealth Management.
In Asia, eyes will be on Beijing’s release of second-quarter GDP data that’s expected to show China’s economy expanded just above the government’s full-year growth target of 5%. That will ease the pressure on the need for additional stimulus in the near term.
The print is coming out after data showed China ended the first half of the year with a record trade surplus of about $586 billion as exports to the US began to stabilize, with factories riding out the tariff rollercoaster that upended global commerce.
Still, the lingering problem in the nation’s property market were showed up on Monday when China Vanke Co. said its first-half loss could reach as high as $1.67 billion.
In the US, traders are gearing up for results from big banks and inflation data. While Corporate America is bracing for its weakest earning season since mid-2023, lower estimates could be easier for companies to beat. As US financial giants kick off earnings season Tuesday, strategists say subdued profit expectations are setting the stage for their sizzling run to continue.
Treasuries saw mild losses in the run-up to the consumer price index release. After months of seeing little inflation, the CPI probably experienced slightly faster growth in June as companies started to pass along higher costs of imported merchandise associated with tariffs.
The options market is betting the S&P 500 will swing 0.6% in either direction after Tuesday’s CPI, based on the cost of at-the-money puts and calls, according to Citigroup Inc. That would be in-line with implied moves the past two months, though below an average realized swing of 0.9% over the last year.
Some of the main moves in markets
Stocks
S&P 500 futures were little changed as of 9:17 a.m. Tokyo time
Japan’s Topix rose 0.4%
Australia’s S&P/ASX 200 rose 0.7%
Euro Stoxx 50 futures fell 0.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1672
The Japanese yen was unchanged at 147.72 per dollar
The offshore yuan was little changed at 7.1712 per dollar
Cryptocurrencies
Bitcoin fell 0.5% to $119,647.94
Ether was little changed at $3,006.93
Bonds
The yield on 10-year Treasuries was little changed at 4.43%
Japan’s 10-year yield advanced 1.5 basis points to 1.590%
Australia’s 10-year yield was little changed at 4.37%
Commodities
West Texas Intermediate crude fell 0.3% to $66.76 a barrel
Spot gold rose 0.1% to $3,346.95 an ounce
