Asian shares gained momentum on Tuesday following a second consecutive day of rallies on Wall Street, driven by optimism around technology stocks and a reduction in fears over potential tariff hikes. This shift in market sentiment came after former U.S. President Donald Trump refuted claims that his proposed tariffs on critical imports might be scaled back.
A regional gauge of Asian equities advanced by 0.7%, buoyed by gains in Japan, South Korea, and Australia. Japan’s Topix surged 1.1%, while South Korea and Australia posted smaller but significant increases. Conversely, Chinese markets exhibited mixed results, with mainland Chinese stocks fluctuating and Hong Kong’s market experiencing early losses.
Prominent in Hong Kong’s decline was Tencent Holdings Ltd., which saw its shares drop by as much as 7%. Similarly, Contemporary Amperex Technology Co. (CATL) fell over 6% after the U.S. Department of Defense added them to a blacklist, labeling them military entities—a move likely to exacerbate U.S.-China tensions.
U.S. Futures and Technology Surge
U.S. stock futures showed stability in Asian trading hours after the S&P 500 gained 0.6% on Monday, with the Nasdaq 100 adding 1.1%. Notably, Nvidia Corp. reached a record high ahead of a highly anticipated speech by its CEO, Jensen Huang.
The tech sector’s resilience reflects a continued investor appetite for growth stocks, particularly in the semiconductor space, driven by strong earnings and innovation narratives.
Currency and Bond Market Reactions
In currency markets, the U.S. dollar pared earlier losses after Trump dismissed reports of softened tariff policies. The dollar, which had dropped as much as 1% on Monday, trimmed its decline to 0.6% and remained flat in Asian trading. The Japanese yen weakened to its lowest point since July 2024, trading at 158.42 per dollar, influenced by robust U.S. economic data and expectations of further dollar strength.
Treasury yields remained relatively stable, with the 10-year yield at 4.62%, reflecting investor caution amidst ongoing economic uncertainties. The 30-year yield reached its highest level in over a year on Monday, signaling concerns over long-term growth prospects.
Trade Frictions and Market Volatility
Market participants are bracing for increased volatility as Trump’s proposed tariffs risk escalating global trade tensions. The recent U.S. move to blacklist key Chinese firms underlines the fragile state of U.S.-China relations and could further strain the world’s second-largest economy.
“There are jitters around the yuan and that could worsen, which would sour sentiment,” noted Sat Duhra, a portfolio manager at Janus Henderson Investors. “Trump’s reconfirmation of broader tariff imposition is another source of volatility.”
Canadian Dollar and Global Credit Markets
The Canadian dollar turned flat after initially gaining ground following Prime Minister Justin Trudeau’s resignation as head of the Liberal Party. In the credit markets, the start of the year has been marked by a flurry of activity, with Asia Pacific borrowers selling around $7 billion in dollar-denominated debt on Monday. The momentum is expected to continue with several issuers lining up new offerings.
Economic Data and Central Bank Insights
Market attention is shifting to upcoming economic data and central bank commentary, which could shape future monetary policy directions. The U.S. jobs report due on Friday is expected to show a moderation in hiring, reflecting a steady yet cooling labor market. This data will likely influence the Federal Reserve’s stance on interest rate adjustments.
Fed Governor Lisa Cook indicated a cautious approach, citing a robust labor market and persistent inflation pressures. This sentiment was echoed by other Fed officials scheduled to speak throughout the week.
Cryptocurrency and Commodities
Bitcoin surged past the $100,000 mark, maintaining its position as a leading asset in the digital currency space. Ether also saw a slight increase, reflecting the broader stability in the crypto market.
In commodities, West Texas Intermediate (WTI) crude oil fell 0.4% to $73.30 a barrel after a six-day rally, while spot gold remained little changed. These movements suggest a balancing act between supply dynamics and market sentiment around economic growth.
- Eurozone CPI and Unemployment (Tuesday)
- U.S. Job Openings, Trade, ISM Services (Tuesday)
- Fed Speeches (Tuesday through Thursday)
- China CPI and PPI (Thursday)
- U.S. Jobs Report and Consumer Sentiment (Friday)
The U.S. will also observe a federal holiday on Thursday in honor of former President Jimmy Carter, marking a day of national mourning.
