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Stock markets in Asia rallied on Tuesday, with Japanese and Australian equities hitting record highs after US President Donald Trump extended a trade war truce with China.
Japan’s Topix benchmark rose 1.4 per cent, while the country’s exporter-oriented Nikkei 225 jumped 2.2 per cent, sending both indices to new records.
Australia’s S&P/ASX 200 hit a new all-time high after climbing 0.4 per cent after the Reserve Bank of Australia cut interest rates to 3.6 per cent while signalling that further easing may be coming. China’s CSI 300 gained 0.5 per cent.
Trump signed an executive order on Monday to extend a trade war truce with China for another 90 days, just hours before his Tuesday deadline to raise tariffs on the world’s biggest exporter.
The US “continues to have discussions with [China] to address the lack of trade reciprocity in our economic relationship and our resulting national and economic security concerns”, said Trump.
The truce adds to risk appetite in markets, said Hao Hong, chief investment officer at hedge fund Lotus Asset Management. “People have another 90 days to play with.”
“The fact that we’re not going back into the trade war scenario we had in April is positive for global equities,” said Bruce Kirk, chief Japan equity strategist at Goldman Sachs.
Kirk noted other significant factors driving Japan’s record equity run, including normalising monetary policy, strong corporate earnings and clarity on its trade deal with the US.
“The trade deal has reaffirmed that Japan is one of the key US allies in the region, and there’s less geopolitical risk investing in Japan than other geographies,” said Kirk.
Investors and analysts said markets in Asia were also benefiting from a broader rotation of money away from US assets. “Non-US markets have been doing quite well,” said Hong.
European and US markets were more muted, as investors awaited US inflation data later in the day for the latest clues about whether the Federal Reserve is likely to cut interest rates in September.
The Stoxx Europe 600 index climbed 0.1 per cent. Futures tracking the S&P 500 and Nasdaq were little changed.
The figures on Tuesday, which are expected to show annual inflation edging higher to 2.8 per cent, will offer an important insight into the degree to which the steep tariffs implemented by Trump are being passed on to American consumers. The latest round of tariffs came into effect on August 7, but some levies have been in place for many months already.
The US dollar was steady on Tuesday morning ahead of the data release.
