Asian equities experienced a slight uptick on Thursday as investors carefully weighed the latest developments in the China-US trade war and anticipated further interest rate cuts by the Federal Reserve. The trade tensions between the US and China have been escalating since US President Donald Trump threatened to impose 100 percent levies on Chinese goods in retaliation for China’s rare-earth export controls.
The situation has been marked by tit-for-tat measures and warnings, raising concerns about the stability of the truce between the two superpowers. Trump’s recent statement that the countries are engaged in a trade war has added to the sense of unease. However, his Treasury Secretary, Scott Bessent, has proposed a longer pause in tariffs as the countries work towards resolving the rare earths row.
The Federal Reserve’s “Beige Book” survey has pointed to a softer job market, which has provided additional justification for potential rate cuts. The central bank’s boss, Jerome Powell, has also warned that “the downside risks to employment appear to have risen.” Despite this, economists at Bank of America remain cautious, citing uncertainties surrounding inflation, growth, and the Trump administration’s policies.
The uncertainty surrounding the trade war has led to increased bets on US rate cuts, a weaker dollar, and concerns about the latest China-US flare-up, which has driven gold to daily records. The Indian rupee has also experienced significant gains after the central bank intervened, driven by a softer dollar index and supportive factors such as lower crude oil prices and renewed foreign fund inflows.
Key market figures at around 0230 GMT included the Tokyo Nikkei 225, which rose 0.9 percent to 48,088.07, and the Hong Kong Hang Seng Index, which increased 0.2 percent to 25,953.67. The Shanghai Composite also experienced a 0.1 percent uptick to 3,914.85. The euro/dollar exchange rate rose to $1.1670, while the pound/dollar exchange rate increased to $1.3436.
The ongoing trade tensions and potential interest rate cuts will continue to be closely watched by investors, with many anticipating further developments in the coming weeks. The Asia-Pacific Economic Cooperation summit, where Trump and Chinese counterpart Xi Jinping are expected to meet, will be a key event to watch. As the situation continues to unfold, investors will be looking for signs of stability and progress in the trade negotiations.
