Asian stocks hold their breath as they await news on US-China trade talks

Nikkei 225 Index Performance

President Donald Trump on Thursday announced the broad outline of a trade deal with the U.K. But the “general terms” deal is limited, modestly expanding agricultural access for both countries and reducing U.S. tariffs on British cars, but leaving the base tariff at 10 percent.

However, this is the first trade deal the US has signed with a trading partner, and when announcing the deal, Mr. Trump also said he expected substantive negotiations between the US and China later this week and that the 145% tariff on China would likely be reduced.

But he also resisted seeing the UK deal as a template for other negotiations, saying many other trading partners could face much higher final tariffs due to their large trade surpluses with the US.

The news dampened investor optimism, with investors waiting to hear more details after a meeting between US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer with Chinese officials in Switzerland on Saturday.

Accordingly, Japan's major stock indexes all increased, such as Nikkei 225 increased by 1.39%; while Topix increased by 1.46% and is heading for the 11th consecutive increase, the longest increase streak since October 2017.

Elsewhere, Australia's ASX 200 rose 0.49%, while Taiwanese shares also rose 1%. However, South Korea's Kospi fell 0.12%. Mainland Chinese blue chips (CSSI 300) also opened down 0.2%, while Hong Kong's Hang Seng index rose 0.2%.

MSCI's broadest index of Asia- Pacific shares outside Japan was broadly flat.

In the overnight trading session, expectations that trade tensions between the US and its partners, especially China, would be resolved pushed major US stock indexes to close in the green.

Specifically, the Dow Jones Industrial Average increased 254.48 points, equivalent to 0.62%, to close at 41,368.45 points. The S&P 500 index increased 0.58% and closed at 5,663.94 points. The Nasdaq Composite index increased 1.07% and closed at 17,928.14 points.

US stock futures were trading near flat as investors hoped that the US-UK trade deal framework signaled more progress to come.

Although the US-UK deal is more about form than substance, “it does feed the narrative that the US is looking to reach a quick trade deal and reduce tariffs — at a margin — and other trade barriers,” said Kyle Rodda, senior financial markets analyst at Capital.com, adding: “Constructive language and statements of intent will likely be enough to push stocks higher following the US-China trade talks.”

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