Asian stocks saw a rise on Tuesday, managing to recoup some of their recent losses. Investors are keenly awaiting more clues regarding a potential trade war between China and the West, while also focusing on the upcoming inflation data.
Chinese markets managed to stabilise after experiencing three days of steep declines, coinciding with Chinese and European ministers opening discussions over import tariffs on Chinese electric vehicles. Despite this, sentiment towards the country remains fragile.
Regional markets were influenced by Wall Street’s performance, which ended mostly lower due to losses in heavyweight chipmaking stocks. In Asian trade, U.S. futures remained largely flat. This week, much attention is on the forthcoming PCE price index data, which is the Federal Reserve’s preferred inflation gauge and is likely to influence the outlook for U.S. interest rates. The anticipation of this inflation data has kept broader Asian markets subdued, and weakness in technology shares has also limited overall gains.
In China, the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes each rose by 0.1%, while Hong Kong’s Hang Seng index surged nearly 1%. These gains come after the indexes recorded significant losses in recent sessions, following warnings from Chinese officials about a potential trade war with the EU over new import duties on Chinese electric vehicles. Chinese ministers are in dialogue with German officials about possibly reducing or lifting these tariffs, which are expected to be implemented from July. Meanwhile, Canada is considering curbs on Chinese EV imports, joining the U.S. and the EU in taking such measures. This development could further strain relations between China and the West.
Concerns about China have significantly impacted sentiment towards Asia in recent sessions, especially if trade tensions with other major economies escalate. Sentiment was further affected by a Reuters report indicating that the Biden Administration is investigating major Chinese telecom firms over potential security concerns.
Japan’s Nikkei 225 index rose by 0.5%, although losses in heavyweight tech stocks kept the index largely rangebound. However, the broader TOPIX index surged 1.4%, boosted by a rebound in economically sensitive stocks. This week, attention is also on upcoming consumer price index inflation data from Tokyo, due on Friday. This follows the Bank of Japan’s latest meeting minutes, which revealed some members speculating over a possible interest rate hike in July. The yen’s weakness, which could attract government intervention, also kept sentiment towards Japan cautious.
In other Asian markets, Australia’s ASX 200 rose 0.9%, driven by gains in mining stocks on the back of stronger commodity prices. Focus is also on an upcoming CPI indicator from the country, due on Wednesday. A private survey indicated a slight improvement in Australian consumer sentiment in June. South Korea’s KOSPI added 0.4%, with larger gains being limited by losses in technology stocks. Futures for India’s Nifty 50 index pointed to a flat open, as the index continues to face resistance near recent record highs.
Asian stocks experienced a modest recovery as investors await further developments on the trade front and upcoming inflation data. While markets have stabilised, underlying tensions and upcoming economic indicators will continue to shape sentiment and market performance in the coming days.
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