Asian Stocks Slip as Rare Earth Tensions Dent Shutdown Optimism – Asia Market Wrap

The global stock rally sparked by optimism over a deal to end the US government shutdown lost momentum in Asia, after reports that China plans to tighten rare earth exports to the US reignited trade tensions.

MSCI’s Asia-Pacific equity gauge reversed early gains to fall 0.3%, with Chinese markets leading declines. The country’s main benchmark slid 0.9%, while US equity futures edged 0.1% lower following Monday’s strong advance in the S&P 500. Contracts for European stocks also trimmed earlier gains.

Sentiment soured after the Wall Street Journal reported that China will accelerate export approvals for most rare earth producers but exclude companies with links to the US military. The move stoked fears of a renewed flare-up in trade friction between the world’s two largest economies, even as progress continues toward ending Washington’s record government shutdown.

In Japan, demand at a 30-year bond auction came in weaker than the 12-month average, as investors turned cautious amid renewed debate over Prime Minister Sanae Takaichi’s fiscal strategy.