Asian Stocks Rise on Trump’s Tariff Reluctance: Markets Wrap

This content was published on January 24, 2025 - 05:23

4 minutes

(Bloomberg) — Asian equities rose, with Chinese stocks leading gains after comments from US President Donald Trump hinting at a potentially softer approach toward tariffs on China. The yen strengthened after the Bank of Japan raised interest rates.

A gauge of Chinese stocks in Hong Kong jumped, while the dollar weakened and the yuan extended gains, after Trump said in an interview with Fox News that he would rather not have to use tariffs against the world’s second-largest economy.

“Price action will be volatile because those negotiations may not lead to success,” said Alvin Tan, an FX strategist at Royal Bank of Canada in Singapore. “But the situation is definitely turning away from the worst-case fears regarding US tariffs. It’s still very early days, and Trump is mercurial, but it does increasingly appear that US trade policy on China is on the negotiating table.”

Assets often seen as proxies for China also reacted, with the Australian dollar gaining 0.5%. But some recommended caution in interpreting the US President’s comments.

Trump’s remarks “could be a sign he’s willing to negotiate with Beijing before resorting to massive levies on imports from China,” said Chang Shu, Chief Asia Economist for Bloomberg Economics, in a note. “That said, it’s difficult to see Trump backing down from his tariff threats.”

The Japanese currency strengthened against the greenback, after the Bank of Japan raised interest rates for the first time since July. The country’s 10-year government bond yield rose 1.5 basis points to 1.22%. A key focus for the market will now be whether BOJ Governor Kazuo Ueda will give any hints about the pace of future hikes at his press conference this afternoon.

“We believe that the BOJ will go for a few more rate hikes above 0.5% threshold that we previously viewed as a key hurdle,” said Homin Lee, senior macro strategist at Lombard Odier. The dollar-yen exchange rate should “have a relatively firm resistance around 160 now that the BOJ is keeping its options open for possible additional rate hikes on the horizon.”

A gauge of Asian stocks headed for its second week of gains, following a rebound in technology shares that pushed Wall Street to a record high. Futures for the S&P 500 were steady. The 10-year Treasury yield slipped.

Oil slid for a sixth day. Trump used an address to world leaders gathered in Davos, Switzerland, to say he would ask Saudi Arabia and other OPEC nations to “bring down the cost of oil,” casting the push for more crude output as a way to heighten pressure on Russia and help end the nearly three-year war in Ukraine.

Back in the US, there’s some optimism Trump’s administration may be able to thread the needle in introducing measures that will boost growth and stocks, even while keeping a lid on prices pressures, which should allow the Federal Reserve to continue monetary easing this year.

In the corporate world, shares of Mitsubishi Motors Corp. fell after Japanese media reported that it won’t be a part of Honda Motor Co. and Nissan Motor Co.’s plans to combine their companies under a holding company.

Key events this week:

Eurozone HCOB Manufacturing & Services PMI, Friday
US University of Michigan consumer sentiment, existing home sales, S&P Global Manufacturing & Services PMI, Friday

Some of the main moves in markets:

Stocks