Most Asian stocks saw gains on Tuesday, taking cues from a strong finish on Wall Street, driven by growing expectations for a September interest rate cut. However, Chinese markets lagged due to concerns over a cooling economy and U.S. political headwinds.
Regional markets responded positively to dovish comments from Federal Reserve Chair Jerome Powell, which indicated the central bank’s increased confidence in inflation easing. This speculation, along with the potential for a Donald Trump presidency, bolstered stock markets. Investors hope that Trump’s return could lead to a more favourable regulatory environment. During Asian trade, U.S. stock index futures saw an uptick.
In contrast, Chinese stocks struggled. The Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moved within a flat-to-low range, while Hong Kong’s Hang Seng index dropped by 1.5%. The possibility of a second term for Trump negatively impacted Chinese stocks, as Trump has previously maintained a strong stance against China, imposing steep tariffs and sparking a prolonged trade war between Washington and Beijing during his tenure.
Trump, gaining traction over President Joe Biden in the 2024 presidential race, especially after surviving an assassination attempt, has officially been nominated as the Republican presidential candidate. He chose Ohio Senator J.D. Vance as his running mate. This development has rekindled fears of a renewed trade war, particularly after the European Union joined the U.S. in imposing heavy import tariffs on key Chinese industries.
Additionally, disappointing second-quarter GDP data released on Monday further dampened sentiment towards China. Attention is now on the ongoing Third Plenum of the Chinese Communist Party, with increasing pressure on Beijing to introduce more stimulus measures.
Broader Asian markets mostly advanced on Tuesday. South Korea’s KOSPI added 0.1%, while Japan’s Nikkei 225 and TOPIX were the best performers of the day, rising 0.5% and 0.8% respectively, as they caught up with their peers following a holiday on Monday. Futures for India’s Nifty 50 index suggested a positive open, with the index and the BSE Sensex 30 continuing to hit record highs, driven by optimism over the Indian economy.
In Australia, the ASX 200 fell by 0.2% from record highs, primarily due to losses in heavyweight miner Rio Tinto Ltd. Rio Tinto dropped by 2.3% after its second-quarter iron ore shipments missed estimates because of disruptions caused by a train derailment. Although shipments rose despite slowing demand in China, the firm’s outlook remained uncertain due to the Chinese economic slowdown. This weakness in China also negatively affects other Australian commodity stocks, as China is Australia’s largest export market. BHP Group Ltd, Rio’s peer, fell by 1.7% and is set to report its quarterly production figures later this week.
Tuesday saw a mixed performance in Asian markets. While most stocks rose on Wall Street’s gains and positive economic sentiment, Chinese markets lagged due to political and economic concerns. The potential for a renewed trade war and disappointing GDP data weighed heavily on Chinese stocks, highlighting the intricate balance of global economic interdependence.
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