(Bloomberg) — Asian equities struggled for direction ahead of the Federal Reserve’s policy decision, while modest progress in US-China trade talks did little to boost sentiment. The yen strengthened after Japan issued a tsunami warning.
The MSCI regional stock gauge rose 0.3% with Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. advancing. Treasuries were steady Wednesday after jumping the most in a month in the prior session. Oil held its biggest gain in six weeks after President Donald Trump’s reiteration that further levies on Russia remained on the table without a Ukraine truce.
The yen gained 0.3% against the dollar after a tsunami warning for areas including the Tokyo Bay. A gauge of the greenback weakened for the first time in five days. Australian bonds extended gains and the currency dipped after core inflation unexpectedly slowed.
Hong Kong shares declined 0.7% while those in mainland China fluctuated. The US and China will continue talks over maintaining a tariff truce before it expires in two weeks and Trump will make the final call on any extension. Adding an extra 90 days is one option, Treasury Secretary Scott Bessent said.
Much like the muted response to the US-EU tariff deal, the latest signs of progress with Beijing did little to shift investor mood. There are also other market-moving factors on the horizon. Those include Wednesday’s Fed decision — where policy makers are expected to keep rates on hold — and key data including Friday’s jobs report. Four tech giants will also report earnings over a two-day stretch.
“The market is getting better at pricing this behavior – that is, extension, as long as you say it’s positive development,” said Billy Leung, investment strategist at Global X ETFs. “Previously, this lack of development could have caused much larger negative reaction.”
The Stockholm negotiations marked the third round of US-China trade talks in less than three months. They wrapped up ahead of an Aug. 12 deadline to resolve differences during a 90-day suspension of tariffs that had threatened to cut off bilateral trade between the world’s largest economies.
“While there is disappointment that nothing material was agreed, the mood seems to be constructive and optimistic about future potential deals,” said Kelvin Lam, senior China economist at Pantheon Macroeconomics in London. “In the medium term, the extension is basically relaying the uncertainty of trade policies, and it will weigh on the Chinese economy in the second half.”
The discussions show a “willingness to reach an agreement,” said Jun Bei Liu, founder of Ten Cap Investment. Markets have been ‘incredibly strong, we are just seeing some consolidation,” she said.
Meanwhile, Trump said that India may be hit with a tariff rate of 20% to 25% but cautioned the final levy had still not been finalized as the two countries negotiate on a trade deal ahead of an Aug. 1 deadline.
Elsewhere, the US issued a tsunami warning for Hawaii following a powerful earthquake off the east coast of Russia, alongside a similar alert from Japan. The magnitude 8.7 earthquake struck southeast of Petropavlovsk-Kamchatsky on the Kamchatka Peninsula, according to the US Geological Survey, on Wednesday morning local time.
On the economic front, US consumer confidence increased as concerns eased about the outlook for the broader economy and the labor market. While job openings fell, they hovered at a level that indicates generally stable demand for workers.
In a rare occurrence, policymakers will convene in the same week that the government issues reports on gross domestic product, employment and the Fed’s preferred price metrics. Fed Chair Jerome Powell could face dissent from one or more colleagues arguing it’s time for the central bank to provide more support to a slowing labor market.
“We believe the Fed wants to maintain flexibility on when to deploy further rate cuts. In our view, the Fed will remain on hold until ‘hard data’ begins to confirm the slowdown story,” said Luis Alvarado at Wells Fargo Investment Institute. “The Fed will have the opportunity to cut rates later in the year if the economy slows and as long as inflation allows.”
In corporate news, Iveco Group NV confirmed it is planning to break up the company, saying it is in advanced discussions to sell its defense unit and the commercial truck manufacturing operations to separate buyers. The statement issued Tuesday came after Bloomberg reported that the company was poised to announce a sale of the defense unit to Leonardo SpA and the commercial trucking business to India’s Tata Motors Ltd. as early as Wednesday, when it’s scheduled to report earnings.
S&P 500 futures rose 0.1% as of 10:42 a.m. Tokyo time Nikkei 225 futures (OSE) fell 0.5% Japan’s Topix rose 0.1% Australia’s S&P/ASX 200 rose 0.4% Hong Kong’s Hang Seng fell 0.5% The Shanghai Composite rose 0.2% Euro Stoxx 50 futures were little changed Currencies
The Bloomberg Dollar Spot Index fell 0.1% The euro rose 0.2% to $1.1568 The Japanese yen rose 0.2% to 148.09 per dollar The offshore yuan was little changed at 7.1765 per dollar The Australian dollar was little changed at $0.6514 Cryptocurrencies
Bitcoin rose 0.3% to $117,874.72 Ether rose 0.8% to $3,795.85 Bonds
The yield on 10-year Treasuries was little changed at 4.32% Japan’s 10-year yield was unchanged at 1.555% Australia’s 10-year yield declined seven basis points to 4.26% Commodities
West Texas Intermediate crude was little changed Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
-With assistance from Jacob Gu, Winnie Hsu, Rob Verdonck and Abhishek Vishnoi.
