Stocks Extend Rally Amid Trade Optimism, But Tariff Tensions Hit Japan – Asia Market Wrap
Stocks kicked off the second half by building on a record-breaking rally as expectations grow that the US economy will withstand uncertainties from President Donald Trump’s tariff agenda.
The MSCI All Country World Index, which closed at a record on Monday, gained for a fourth day. Equity gauges in Taiwan and South Korea led advances in Asia, while contracts for the S&P 500 dipped 0.1% after the benchmark notched its best quarter since December 2023. Treasuries rose with yields on the 10-year falling about 2 basis points to 4.21%.
Wall Street’s bulls drove stocks to all-time highs at the end of a solid quarter, amid hopes the US is moving closer to reaching concrete deals with its top trading partners. Bets the Federal Reserve will resume rate cuts powered the best first-half stretch for Treasuries in five years.
Still, broader uncertainty over Trump’s tariff and fiscal agenda on the long-term structure of the US economy can be seen in the dollar posting a 10.8% slide in the year’s opening six months – its worst first-half performance since 1973. The president’s $3.3 trillion tax and spending bill, which members of the Senate are arguing over, has raised concerns of the country’s growing deficit.
Japanese shares fell as much as 1.2% as Trump threatened to impose a fresh tariff level on the country and the yen strengthened, which hurts exporters.
Trump’s latest round of brinkmanship on Japan came as the July 9 deadline for higher tariffs to restart for dozens of trading partners, nears. He cited what he said was Japan’s unwillingness to accept US rice exports. Earlier, the president had characterized trade in cars between the two countries as unfair and floated the idea of keeping 25% tariffs on autos in place.
A stronger yen also weighed on Japanese stocks after confidence among Japan’s large manufacturers edged up in June. The better- than-expected reading for sentiment at large manufacturers is likely to give Bank of Japan Governor Ueda confidence he can keep the debate around a potential rate hike on the agenda when his board next meets at the end of the month.
