(July 15): Asian shares swung between small gains and losses ahead of China’s release of gross domestic product (GDP) data, which will give investors clues on the impact from President Donald Trump’s tariffs.
The MSCI Asia Pacific gauge dipped 0.1% amid declines in Japan and South Korea. Equity-index futures for US stocks dipped 0.1% Tuesday after the S&P 500 had eked out a gain Monday with Trump indicating he’s open to trade talks. Bitcoin slipped below US$120,000 (RM510,720). 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 wide-ranging tariffs were announced, to record high levels as investors speculate the levies won’t significantly harm the US economy and company earnings, which kick off this week. That optimism faces a key test Tuesday as China releases gross domestic product data and investors read the US inflation print.
“Markets have been much more resilient than what we anticipated at the start of the year,” Vikas Pershad, Asian equities portfolio manager at M&G Investments said in a Bloomberg TV interview. “We also are subject to this crisis fatigue that seem to have set in across market.”
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. The US also moved to impose 17% tariff on Mexican tomato imports.
“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 US$586 billion (RM2.49 trillion) as exports to the US began to stabilise, with factories riding out the tariff rollercoaster that upended global commerce.
Still, the lingering problems in the nation’s property market showed up on Monday when China Vanke Co said its first-half loss could reach as high as US$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 earnings 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.
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 realised swing of 0.9% over the last year.
“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.”
Stocks
- S&P 500 futures fell 0.1% as of 10.05am Tokyo time
- Japan’s Topix was little changed
- Australia’s S&P/ASX 200 rose 0.3%
- Euro Stoxx 50 futures rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1667
- The Japanese yen was little changed at 147.67 per dollar
- The offshore yuan was little changed at 7.1720 per dollar
Cryptocurrencies
- Bitcoin fell 0.8% to US$119,285.84
- Ether fell 0.5% to US$2,988.73
Bonds
- The yield on 10-year Treasuries was little changed at 4.43%
- Japan’s 10-year yield advanced one basis point to 1.585%
- Australia’s 10-year yield was little changed at 4.38%
Commodities
Spot gold rose 0.1% to US$3,348.43 an ounce
West Texas Intermediate crude fell 0.3% to US$66.75 a barrel
– The Edge
