Asian Stocks Muted Amid Trade Caution, Japan Recovers on Yen Weakness
The Asian stock markets moved in a flat-to-low range on Tuesday as investors remained cautious over potential US trade tariffs. Despite President Donald Trump's decision to delay steep tariffs on the European Union, traders were still worried about the impact of US trade policies on regional economies.
Regional markets received minimal trading cues from Wall Street, which was closed on Monday for the Memorial Day holiday. However, US stock index futures surged in Asian trade, as investors welcomed Trump's tariff delay and expressed risk-on sentiment ahead of the European open.
The technology sector was a focal point this week, particularly with NVIDIA Corporation (NASDAQ:NVDA) scheduled to release its earnings report on Wednesday. Investors were eager to see how the company's performance would reflect the growing demand for artificial intelligence solutions.
Japan Shares Recover as Improving Risk Dents Yen
Japan's Nikkei 225 index rose by 0.5% and the TOPIX added 0.4% by the market close, reversing initial losses and heading towards a stronger close. The gains were mainly driven by export-oriented sectors, which benefited from some weakening in the yen after Reuters reported that the Japanese government was considering trimming long-term bond issuances due to recent turmoil in sovereign debt markets.
The yen's weakness was also attributed to improving risk appetite, following Trump's tariff delay. However, the currency had firmed earlier on Tuesday, and stocks had fallen after BOJ Governor Ueda highlighted risks from high underlying inflation and warned that the central bank would raise interest rates further if the Japanese economy improves.
Ueda emphasized that if upcoming economic readings continue to signal strength, the BOJ will scale back monetary easing. He also noted that Japanese inflation was close to the BOJ's 2% annual target in 30 years. Ueda's comments came after data last week showed a bigger-than-expected pickup in Japanese consumer inflation, driven by strong springtime wage hikes.
However, Japan's economy shrank in the first quarter of 2025, amid growing concerns over the impact of US trade tariffs on local businesses, particularly automakers. The decline was attributed to increased uncertainty and reduced spending, which led to a decrease in private investment.
Asia Stocks Muted Amid Tariff Caution
Broader Asian markets moved in a flat-to-low range on Tuesday as investors remained cautious about potential US trade tariffs. Despite Trump's tariff delay for the European Union, he did not address his threat to impose tariffs on smartphone imports to the US, which could negatively impact several Asian tech majors.
South Korea's KOSPI was among the worst performers in Asia on Tuesday, down 0.5%, as chipmakers Samsung Electronics Co Ltd (KS:005930) and SK Hynix Inc (KS:000660) retreated. Samsung could also face US import duties on smartphones, which sent shares of its Asian suppliers lower this week.
Hong Kong-listed AAC Technologies (HK:2018) and Luxshare Precision Industry Co Ltd (SZ:002475) lost nearly 2% each, while Xiaomi Corp (HK:1810) lost 0.7% before its quarterly earnings due later in the day. The Hang Seng index added 0.2%, but the mainland Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.4% and 0.1%, respectively.
Taiwan's TSMC (TW:2330) fell by 1%, while Hon Hai Precision Industry Co Ltd (TW:2317) rose 0.3%. HK-listed shares of JD.com (HK:9618) plummeted after rival Meituan's CEO Wang Xing flagged heightened competition in China's instant retail market.
Singapore's Straits Times index was flat, while Australia's ASX 200 rose by 0.5%, driven by some strength in financials. BHP Group Ltd (ASX:BHP) fell 0.1% after rising as much as 1.5%. A report indicated that the world's largest miner was in talks to sell some of its Brazilian copper and gold assets to Nexa Group.
India's Nifty 50 index fell by 0.4%, facing profit-taking after it surged above the 25,000 level on Monday.
Conclusion
The Asian stock markets experienced a flat-to-low range on Tuesday as investors remained cautious about potential US trade tariffs. Japan's Nikkei 225 and TOPIX indexes recovered from initial losses, driven by export-oriented sectors benefiting from yen weakness. However, broader Asian markets were muted amid tariff concerns, with South Korea's KOSPI being among the worst performers.
Regional economies face growing uncertainty due to increased competition in key industries and potential impacts of US trade policies on local businesses. The ongoing situation highlights the need for investors to carefully assess regional market dynamics and respond accordingly to shifting global economic conditions.