On Monday, Asian markets displayed a positive trend as investors braced for crucial trade discussions between Washington and Beijing. The spotlight was also on significant economic indicators from China. There appears to be a reduction in trade friction between the two largest global economies, given that China has reportedly permitted temporary exports of rare earths, and Boeing Co. has resumed commercial aircraft deliveries to this major Asian nation. Financial indices across Asia showed mixed performances, reflecting cautious optimism amidst economic uncertainties.
Recent developments indicate an easing of tensions between the U.S. and China. Notably, China's consumer price inflation decreased by 0.1% year-over-year in May, which was less than the anticipated decline of 0.2%. Meanwhile, the producer price index saw a 3.3% drop, slightly worse than forecasts. In mainland China, the CSI 300 index remained steady at the start of the day, whereas Hong Kong’s Hang Seng Index rose by 0.86%. Japan's Nikkei 225 advanced by 0.91%, and the broader Topix index climbed by 0.58%. Revised GDP figures for Japan's first quarter showed a contraction of only 0.2%, a marked improvement from the initially reported 0.7%.
In South Korea, the Kospi index surged by 1.71%, while the small-cap Kosdaq added 0.46%. Australian markets were closed due to a public holiday. Concurrently, U.S. equity futures exhibited minimal movement during early Asian trading hours. Wall Street experienced a robust session last Friday after better-than-expected non-farm payroll data. The Dow Jones Industrial Average gained 443.13 points, or 1.05%, closing at 42,762.87. Similarly, the S&P 500 rose by 1.03%, surpassing the 6,000 mark for the first time since late February, and settling at 6,000.36. The Nasdaq Composite rallied by 1.20%, ending at 19,529.95.
Japan's revised GDP data for the January to March quarter revealed a smaller contraction than previously estimated. Instead of the initial 0.7% decline, the Cabinet Office announced a more modest annualized drop of 0.2%. Analysts had expected no change from the preliminary reading. With this new information, market participants are closely observing the Bank of Japan's monetary policy stance, particularly following its decision to lower growth and inflation projections during the May 1 meeting. A two-day policy meeting is scheduled for the following week.
Meanwhile, President Donald Trump urged Federal Reserve Chair Jerome Powell to implement a one-percentage-point interest rate cut despite solid employment data. In a post on Truth Social, Trump criticized the Fed's inaction, stating, "Go for a full point, Rocket Fuel!" However, according to CME's Fedwatch tool, traders currently see almost no likelihood of any rate reduction in June after the upcoming Fed meeting.
As the global financial landscape evolves, investor sentiment remains influenced by ongoing trade negotiations and evolving economic indicators. Market movements across Asia and beyond underscore the interplay between geopolitical developments and macroeconomic factors, shaping the trajectory of regional and international markets.