Markets watch: Japan’s Nikkei 225 reaches record high, Asian stocks rise; crude gains as US-China tariff truce lifts sentiment

Asian stocks mostly gained on Tuesday, with Japan’s Nikkei 225 (.N225) hitting a fresh all-time record high after US President Donald Trump extended a tariff truce with China for another 90 days, a move that eased trade tensions between the world’s two largest economies and steadied oil prices. The Nikkei jumped as much as 2.8 per cent, or 1,162.86 points, to 42,983.34 in the afternoon before easing back slightly, surpassing its previous record of 42,426.77 set in July last year. Heavyweight shares led the charge — SoftBank Group surged 7.07 per cent, Advantest climbed 7.34 per cent, Toyota gained 3.14 per cent, and Fast Retailing advanced 4.67 per cent. Analysts at IwaiCosmo Securities cited easing tensions over US-China trade talks and speculation over imminent US interest rate cuts as key drivers of the rally. The extension, announced Monday, staves off triple-digit duties on Chinese goods and removes one immediate risk for global markets. Trump signed an executive order delaying the planned tariff hike to allow more time for negotiations, with Beijing issuing a similar statement. Without the extension, tariffs on Chinese imports could have risen from an already steep 30 per cent. According to news agency Reuters, the truce had been largely expected by investors, who have also been buoyed in recent weeks by resilient US corporate earnings and prospects of interest rate cuts by the Federal Reserve. Japan’s Nikkei was last up around 2 per cent as markets reopened after a long weekend, lifted by tech shares and tracking global gains. Australia’s benchmark index (.AXJO) also hit a record high ahead of a central bank policy meeting widely expected to deliver a 25-basis-point rate cut, with another possible by November. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was slightly higher, while China’s blue-chip CSI300 (.CSI300) was flat and Hong Kong’s Hang Seng (.HSI) dipped 0.1 per cent in early trade. “The US-China tariff truce extension preserves the status quo for now, so no immediate implications for investment markets,” Shane Oliver, chief economist and head of investment strategy at AMP in Sydney, was quoted as saying by Reuters. Oil prices also edged up as the trade extension eased concerns that escalating tariffs would weaken global economic growth and crimp fuel demand. Brent crude futures rose 26 cents, or 0.39 per cent, to $66.89 a barrel, while US West Texas Intermediate (WTI) gained 22 cents, or 0.34 per cent, to $64.18, according to Reuters. Investors are also watching the August 15 meeting between Trump and Russian President Vladimir Putin in Alaska, aimed at negotiating an end to the war in Ukraine. “Any peace deal between Russia and Ukraine would end the risk of disruption to Russian oil that has been hovering over the market,” ANZ senior commodity strategist Daniel Hynes wrote in a note, cited by Reuters. Attention in financial markets will now shift to US consumer price inflation data due later Tuesday. Economists polled by Reuters expect July’s core CPI to rise 0.3 per cent month-on-month, faster than June’s 0.2 per cent pace. “CPI will be a key test for market tone. Softer data could give small-caps a lift, but for now, mega-caps remain firmly in control,” said Marc Velan, head of investments at Lucerne Investment Management. Money markets, according to Bloomberg, are pricing in more than two Fed rate cuts by December, with about a 90 per cent probability of a quarter-point reduction next month. However, an upside surprise in inflation could temper those expectations.