(Bloomberg) — Asian stocks nudged higher and the yen weakened as investors took heart from a first round of trade negotiations between the US and Japan.
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Japanese shares gained slightly after President Donald Trump said there was “big progress” in talks to strike a deal for Japan to avoid higher levies. The yen weakened after the country’s chief trade negotiator said currencies weren’t discussed, allaying concerns a stronger exchange rate would be part of the US demands. Gold hit a record in demand for safe havens while Treasury yields and a gauge of the dollar inched up.
Equity-index futures for the US gained while contracts for Europe retreated.
After financial markets were roiled following the announcement of broad US levies earlier this month, global investors have turned their attention to how the country-specific negotiations progress before taking large positions. One big uncertainty is the fate of discussions with China after Beijing indicated Wednesday it wants to see a number of steps from Trump’s administration before it will agree to trade talks.
“Many investors who have thought all along that Trump’s most extreme tariff threats were a negotiating tactic are closely watching the one-on-one discussions with Japan as an indication of what’s to come,” said Phillip Wool, head of portfolio management at Rayliant Global Advisors Ltd. “So the fact that Trump came out today touting ‘big progress’ potentially confirms that view.”
A two-day consolidation in stocks ended Wednesday after the US ratcheted up trade tensions by putting restrictions on some chip exports by Nvidia Corp. Stocks also declined after Federal Reserve Chair Jerome Powell signaled a wait-and-see approach to tariffs. He pushed back on hopes the central bank would act quickly to soothe investor fears.
Treasuries, however, rallied for a third day on Wednesday as investors refocus on the asset as a hedge against risk. Last week, the debt had sold off amid speculation that hedge funds were unwinding positions.
Meanwhile, the US and Japan kicked off tariff negotiations with an aim to reach a deal as soon as possible, Japan’s top negotiator Ryosei Akazawa said. Preparations are underway for the second round of talks to take place later this month, he said.
Countries are racing to negotiate deals with the US to avert high import taxes Trump imposed — and then quickly paused — on about 60 trading partners. That move put a 24% across-the-board tariff on Japanese imports on hold, though a 10% baseline charge still applies — as well as 25% levies on cars, steel and aluminum.
The progress in discussions with Japan, “while preliminary, offer a small positive signal for markets,” said Rajeev De Mello, a global macro portfolio manager at Gama Asset Management. “The trajectory of US-Japan trade talks will continue to be closely monitored, not just for their bilateral implications, but also as a potential framework for how the US may approach trade relationships with other allies.”
The Trump administration is preparing to pressure nations to curb trade with China in negotiations over US tariffs, according to people familiar with the matter.
Chinese President Xi Jinping promoted the idea of an “Asian family” and called for regional unity during a tour of Southeast Asia, in an apparent effort to counter US pressure on nations to limit trade ties with Beijing.
US investors could be forced to offload around $800 billion of Chinese equities “in an extreme scenario” of financial decoupling between the world’s two largest economies, Goldman Sachs Group Inc. estimated.
In a sign that central banks in the region are waiting to see how the impact of tariffs pan out, the Bank of Korea held its benchmark interest rate steady to foster stability. Later Thursday, the European Central Bank is set to cut interest rates.
In commodities, oil rose for a second day after the US vowed to reduce Iran’s energy exports to zero.
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.7% as of 1:59 p.m. Tokyo time
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Japan’s Topix rose 1%
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Australia’s S&P/ASX 200 rose 0.6%
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Hong Kong’s Hang Seng rose 1.6%
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The Shanghai Composite rose 0.2%
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Euro Stoxx 50 futures fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.3% to $1.1362
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The Japanese yen fell 0.6% to 142.67 per dollar
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The offshore yuan fell 0.2% to 7.3109 per dollar
Cryptocurrencies
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Bitcoin fell 0.2% to $84,157.76
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Ether rose 1.1% to $1,590.46
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Aya Wagatsuma and Richard Henderson.
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