Most Asian stock markets saw modest gains at Wednesday’s open, as investors reacted positively to an optimistic tone struck by Chinese and US officials following a second day of talks aimed at de-escalating their protracted trade tensions.
While the progress in London offered a degree of relief to global markets, Indian benchmarks like the Sensex were anticipated to start the day on a more subdued note.
A regional stock gauge opened 0.2% higher, with notable strength in Japan, where stocks gained 0.8%. Equities in Australia and South Korea also advanced.
This positive sentiment was largely driven by comments emerging from the crucial US-China trade negotiations.
US Commerce Secretary Howard Lutnick indicated that US export controls “may ‘come down’ if rare earths and magnets licenses are resolved with China.”
He added that if the presidents of both countries agree, then the US and China will implement the plan.
Echoing this constructive tone, China’s trade representative Li Chenggang told reporters after the talks in London that the two sides had agreed in principle to a structure for implementing the consensus they reached in Geneva last month.
Financial markets are closely watching to see if the world’s largest economies can indeed find a sustainable path to de-escalate the trade war, which economists say has contributed to a downturn in the global economy, with the US being among the hardest-hit nations.
Global stocks have seen some recovery from their April lows after US President Donald Trump suspended his threatened ‘Liberation Day’ tariffs until July 9.
Simultaneously, countries including Japan and India are actively trying to negotiate deals to lower existing US levies.
“Markets will likely welcome the shift from confrontation to coordination,” commented Charu Chanana, chief investment strategist at Saxo Markets.
However, she also injected a note of caution: “But the absence of further scheduled meetings signals that we’re not out of the woods yet—it’s now up to Trump and Xi to approve and enforce the deal.”
The talks in London followed a period of renewed friction, with both the US and China accusing each other of reneging on a deal reached in May in Geneva, where they had initially tried to start dialing back their trade conflict.
Ahead of the latest talks, there were some positive gestures: China granted approval to some applications for the export of rare earths, and US aerospace giant Boeing Co. has also reportedly begun shipping commercial jets to China for the first time since early April, indicating a reopening of some trade flows.
The offshore yuan edged up on the news, providing modest gains for the Australian and New Zealand dollars, often seen as proxies for China’s economic sentiment.
Futures contracts for the S&P 500 and the Nasdaq 100 were flat in early Asian trading.
US inflation data looms: Fed’s stance in focus
Investors are now turning their attention to upcoming US inflation data.
Figures expected on Wednesday are anticipated to show that US consumers likely experienced slightly faster inflation in May, particularly for merchandise, as companies gradually pass along the costs of higher import duties.
This data may reinforce the Federal Reserve’s current wait-and-see stance towards further monetary easing as it assesses the full impact of tariffs.
Traders are increasingly betting that the US central bank will cut interest rates just once this year.
The prices of goods and services, excluding volatile food and energy costs (the so-called core consumer price index), are expected to show a 0.3% advance in May, which would be the most significant increase in four months.
On an annual basis, this core CPI, regarded as a better indicator of underlying inflation, is seen accelerating for the first time this year, potentially reaching 2.9%, based on median projections.
Indian markets: Sensex poised for muted start
Domestic equity benchmark indices in India, the Sensex and Nifty 50, are likely to have a muted start on Wednesday, tracking mixed global cues.
Trends on Gift Nifty also indicated a subdued opening for the Indian benchmark index, with Gift Nifty trading around the 25,175.50 level, a premium of nearly 14.9 points from Nifty futures’ previous close.
On Tuesday, the Indian equity market ended flat. The benchmark Sensex snapped its four-day winning streak due to profit booking, falling 53.49 points, or 0.06%, to close at 82,391.72.
However, the Nifty 50 managed to hold above the 25,100 level, settling 1.05 points higher at 25,104.25.
The Sensex had exhibited narrow range activity throughout Tuesday’s choppy session.
The Nifty 50 has shifted into a consolidation phase with a positive bias over the last couple of sessions and formed a small negative candle on the daily chart on Tuesday.
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