Most Asian stocks kept to a tight range on Wednesday, with Japanese shares retreating as soft trade data highlighted the impact of U.S. trade tariffs, while Australian stocks extended gains on a dovish RBA. 

Regional markets took weak cues from a soft overnight finish on Wall Street, as the S&P 500 ran out of steam after a six-day run-up. S&P 500 Futures fell 0.2% in Asian trade. 

Investors remained on edge over the U.S. economy after Moody’s downgraded its credit rating last week, while trade deals with Washington remained in focus.

A host of Federal Reserve officials warned that trade tariffs would underpin inflation and keep interest rates unchanged for longer. 

Sentiment was also undermined by a report that Israel was planning to attack Iran’s nuclear facilities, a move that could drastically worsen geopolitical conditions in the Middle East. 

Japan’s Nikkei dips as trade data shows tariff impact 

Japan’s Nikkei 225 index fell 0.3%, while the TOPIX was flat after data showed the country logged an unexpected trade deficit in April. 

The deficit was largely spurred by a drop in export growth, while imports were also more resilient than expected after a bumper springtime wage hike. 

Wednesday’s data highlighted the impact of high U.S. tariffs on Japanese trade, and comes just days before Japan is reportedly set to begin a third round of high-level trade talks with Washington. 

But Tokyo has so far shown little intent in shifting from its demand that all U.S. suspend all trade tariffs against the country. 

Australia stocks soar on commodity gains, dovish RBA 

Australia’s ASX 200 index rose 0.8% to a three-month high, extending gains from the prior session.

The ASX was boosted by gains in energy and gold stocks, as oil and bullion prices surged on a report that Israel was planning to attack Iran’s nuclear facilities. 

Australian markets also remained heady after the Reserve Bank cut interest rates by 25 basis points on Tuesday, and flagged softer inflation and economic growth. 

While the RBA did not commit to any further rate cuts, investors saw its outlook as largely dovish, which could herald more easing in the near-term. 

China stocks rise, Beijing criticizes US chip controls 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.6% and 0.3%, respectively, while Hong Kong’s Hang Seng index added 0.7%. 

Chinese markets extended gains after the People’s Bank cut lending rates further this week, loosening monetary conditions and providing more support for the economy. The rate cut also showed Beijing remained committed to supporting growth, which could herald more stimulus measures. 

But concerns over strained U.S.-China relations limited gains in stocks, after China’s commerce ministry issued a new statement criticizing U.S. restrictions on Chinese computing chips. Beijing flagged particular objections to the U.S. attempting to outlaw the use of Huawei chips outside China. 

China had recently warned that the U.S. chip controls threatened to undermine a recent trade truce between the two countries. 

Broader Asian markets were mixed. South Korea’s KOSPI added 1%, while Singapore’s Straits Times index shed 0.2%. 

Gift Nifty 50 Futures for India’s Nifty 50 index pointed to a muted open, after the index tumbled from a seven-month high over the past three sessions. 

TOKYO (Reuters) -Long-dated Japanese government bonds saw little relief on Wednesday after a poor auction result sent yields to record levels and as more debt sales loomed in the weeks ahead.

Super-long yields have been on the rise, following U.S. Treasury yields higher and as concerns swirled about how Japan’s government may fund new fiscal stimulus ahead of a upper house election slated for July.

The selloff in bonds is a quandary for the Bank of Japan, which is trying to taper its debt purchases and normalise monetary policy. Rising long-term borrowing costs is also a warning sign for the highly indebted Japanese government.

A lack of buyers at the Ministry of Finance’s sale of 20-year JGBs on Tuesday resulted in the worst auction result since 2012, according to analysts.

"For demand for super-long bonds to rebound, the market wants to get greater assurance that there will be a reduction of new bond issuance, which is technically possible within this fiscal year," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

"Sentiment will be weighed down ahead of auctions for 30-year bonds next week, and 40-year bonds the week after."

The 20-year JGB yield was flat at 2.555%, after rising 15 basis points on Tuesday to the highest since October 2000.

The 30-year JGB yield fell 1.5 basis points to 3.110%, down from a record 3.14%. The 40-year yield was flat at 3.595% after touching an all-time peak of 3.6% on Tuesday.

Several political parties in Japan have been calling for consumption tax cuts, which Prime Minister Shigeru Ishiba has so far resisted. On Monday, he told parliament that Japan’s fiscal situation was worse than Greece’s at the height of the European debt crisis, according to local media reports.

An uptick in inflation portends less bond purchases by the BOJ, leaving the market vulnerable to the demand of more price-sensitive buyers, said Sally Auld, chief economist at NAB.

"It sort of feels a bit like the perfect storm for the JGB market at a time when generally investors seem to be a little bit more alert or a little bit more worried about the long-end of yield curves in general and rising term premiums," she said.

The benchmark 10-year JGB yield rose 1 basis point to 1.525%. The two-year JGB yield was flat at 0.725%, as was the five-year yield at 1.005%.

U.S. stock index futures fell slightly on Tuesday evening after the S&P 500 benchmark snapped a six-day winning streak amid persistent concerns over the U.S. economy and trade tariffs.

A report that Israel was planning to attack Iran’s nuclear facilities also dented risk appetite, while oil prices sprang up on the prospect of worsening Middle East conditions. 

Comments from a slew of Federal Reserve officials also showed the central bank remained largely on edge over economic and trade-related uncertainty, which diminishes the chance of any interest rate cuts in the near-term. Fed officials also warned that high trade tariffs were likely to drive up U.S. inflation.

S&P 500 Futures fell 0.1% to 5,951.25 points, while Nasdaq 100 Futures fell 0.2% to 21,413.0 points by 19:28 ET (23:28 GMT). Dow Jones Futures fell 0.2% to 42,700.0 points. 

S&P 500 snaps 6-day winning streak on trade, economic uncertainty

The S&P 500 fell for the first time after six sessions on Tuesday, pressured by a pullback in technology shares after recent gains. 

Investors also remained on edge over the U.S. economy after Moody’s downgraded the U.S. credit rating last week, while Congress prepared to vote on a sweeping tax cut bill backed by President Donald Trump.  

On the trade front, investors were holding out for more trade deals between the U.S. and major economies. A host of reports showed high-level talks with Japan are set to resume this week, while negotiations with several other countries are ongoing. 

China added to the risk aversion by warning that the U.S.’ chip export controls threatened to undermine a trade truce reached in Geneva last week. 

Losses in tech stocks weighed heavily on Wall Street, as the sector also saw some profit-taking this week. Nvidia’s unveiling of a host of new artificial intelligence technology inspired limited enthusiasm. 

The S&P 500 fell 0.4% to 5,940.46 points on Tuesday, while the NASDAQ Composite fell 0.4% to 42,677.24 points. The Dow Jones Industrial Average fell 0.3% to 42,677.24 points. 

More retailer earnings on tap 

Several major retailer stocks are set to report earnings on Wednesday, as the first-quarter earnings season winds down. 

Prints from Lowe’s (NYSE:LOW), Target, Canada Goose, and TJX (NYSE:TJX) are due before the market opens, while cloud company Snowflake (NYSE:SNOW) will report after the market closes. Investors are watching retail earnings for more insight into consumer spending, which was seen slowing in recent months due to pressure from trade tariffs.

Next week, AI darling Nvidia (NASDAQ:NVDA) is set to report its first quarter earnings. 

SEOUL (Reuters) -South Korea’s government pledged on Wednesday more support measures for key export industries, including the biopharmaceutical and auto sectors, which are expected to be hit by U.S. President Donald Trump’s sweeping tariffs.

The government will prepare new measures to support its biopharmaceutical companies, as soon as details of Trump’s tariffs on the sector become available, it said in a statement.

Earlier this month, Trump signed an executive order aimed at reducing the time it takes to approve pharmaceutical plants in the country. The move is part of new regulations to encourage domestic manufacturing, coming after Trump launched probes into pharmaceutical imports in order to put tariffs on the sector.

South Korea’s exports of pharmaceutical products stood at $9.59 billion in 2024, accounting for just 1.4% of its total exports. Still, 16% of the exports were shipped to the United States, the biggest market.

The government said it would also prepare additional support measures, if necessary, to complement earlier packages announced last month to help other sectors, such as automakers, chipmakers and steel manufacturers, to cope with tariffs.

After a second round of ministerial-level trade talks last week, Seoul is holding technical discussions with Washington this week at the working level, as it seeks exemptions on all tariffs by crafting a trade package by early July.

South Korea’s exports were unexpectedly resilient last month, buoyed by strong demand for semiconductors despite the drag from U.S. tariffs, but there are signs that global trade tensions have started to impact its key auto sector.

The Reserve Bank of Australia has reduced its policy rate by 25 basis points, bringing it to the lowest level in two years.

This move comes as inflation worries in Australia continue to diminish, providing the central bank with the opportunity to relax its monetary policy.

The benchmark rate has been cut to 3.85%, marking its lowest point since May 2023.

This decision aligns with the predictions of economists who had previously been surveyed.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Most Asian stocks rose marginally on Tuesday, with China in the lead after Beijing cut a key lending rate as expected, while Australian shares firmed in anticipation of a widely expected rate cut by the RBA. 

Regional markets took middling cues from Wall Street, which ended flat on Monday following a downgrade to the U.S. sovereign credit rating by Moody’s. 

But S&P 500 Futures fell 0.2% in Asian trade, while gains in Chinese stocks were also limited after Beijing warned that U.S. controls on chip exports could undermine a trade truce reached last week. 

Focus is now on a U.S. House of Representatives vote on a Trump-backed tax bill, as well as any more developments in U.S. trade talks. 

Chinese stocks firm after loan prime rate cut; trade discourse in focus 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose about 0.3% and 0.2%, respectively, while Hong Kong’s Hang Seng index jumped 1%. 

Gains in Chinese markets came after the People’s Bank of China cut its benchmark loan prime rate as expected, bringing the rate further into record low territory. 

The cut signaled that Beijing was open to doling out more monetary stimulus to support the economy, although investors were still holding out for more fiscal measures, especially those aimed at boosting consumption. 

But gains in Chinese markets were limited by a warning from Beijing that the U.S.’ strict curbs on chip exports to China threatened to undermine progress in a trade deescalation between the two countries.

BEIJING (Reuters) -China cut benchmark lending rates for the first time since October on Tuesday, while major state banks lowered borrowing costs as authorities work to ease monetary policy to help buffer the economy from the impact of the Sino-U.S. trade war.

The widely expected rate cuts are aimed at stimulating consumption and loan growth in a weakening economy while still protecting commercial lenders’ shrinking profit margins.

The People’s Bank of China said the one-year loan prime rate (LPR), a benchmark determined by banks, had been lowered by 10 basis points to 3.0%, while the five-year LPR was reduced by the same margin to 3.5%.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.

The lending rate cut was announced just after five of China’s biggest state-owned banks said they have trimmed their deposit interest rates.

Industrial and Commercial Bank of China, Agricultural Bank of China (OTC:ACGBF), China Construction Bank (OTC:CICHF) and Bank of China reduced deposit rates by 5-25 basis points (bps) for some tenors, according to rates shown on the banks’ mobile apps.

The banks cut interest rates on time deposits by 5 bps to 0.05%, reduced rates on one-year time deposits by 15 bps to 0.95% and shaved off 25 bps on three-year and five-year time deposits.

These deposit rate reductions should guide smaller lenders in making similar cuts.

Reuters reported on Monday that China’s major state banks plan to cut their deposit rates from Tuesday, citing sources.

The rate cuts are part of a package of measures announced by PBOC Governor Pan Gongsheng and other financial regulators before talks between China and the U.S. in Geneva earlier this month that led to a de-escalation in their trade war.

Global investment banks are raising their forecasts for China’s economic growth this year, after Beijing and Washington agreed to a 90-day pause on tariffs, despite uncertainty around Sino-U.S. trade negotiations.

"We still believe it will be quite challenging for Beijing to achieve its ’around 5%’ growth target unless it rolls out a sizable stimulus package," Ting Lu, chief China economist at Nomura, said in a note this week. "Considering the respite on the trade war, Beijing might be under less pressure to introduce the necessary stimulus and reforms."

Recent economic readings show growth remains patchy and lacklustre.

China’s new home prices were unchanged in April from a month earlier, official data showed on Monday, extending the no-growth trend to nearly two years despite policymakers’ efforts to stabilise the sector. Meanwhile, new bank loans also tumbled more than expected last month.

Moody’s downgrade of the U.S. isn’t really about default risk or runaway debt, Macquarie analysts argue, but a political critique of Washington’s inability to course-correct-one that threatens to usher in a prolonged period of “American malaise” and further erode the dollar’s already battered brand as policy uncertainty and ruptured economic norms weigh on global confidence.

“Moody’s downgrade is, effectively, a political assessment, as much as it is an economic one,” Macquarie analysts said in a recent note, highlighting that the agency’s move is less about the risk of outright default and more a signal of Washington’s inability to course-correct on debt and fiscal policy. 

While the U.S. is hardly alone in facing a mounting debt burden, Macquarie warns it’s the dollar that stands to lose the most from the downgrade and the breakdown in economic diplomacy that’s marked recent months.

“It could still be the USD that suffers most from the trends that the Moody’s debt downgrade underscores, over time. The reason is that it is still the USD that has the most to lose, given the high perch from which it may begin its journey downward, and it is the currency that has undergone the largest adverse ’perceptions’ shift in the past few months, given the institutional rupture caused by the ’Liberation Day’ announcements.”

The chances of the U.S defaulting on its interest or principal debt payments, even in theory, is extremely slim because the "Fed can always bail out the US government, albeit through inflation," the analysts said. But that is "exactly the political critique" that can hurt the dollar, they added, as it is associated with "greater policy uncertainty, a rupture of economic-diplomatic norms, and adversely changing perceptions of the US’s ’brand’."

The downgrade has already pushed long-term Treasury yields higher, with the 10-year yield climbing above 4.50% as traders react to the news and foreign holders, including China, adjust their U.S. bond portfolios. Macquarie notes.

With the U.S. coming off a 12-year run of dollar strength, Macquarie warns that the transition to a period of “American malaise” could last five to eight years, with the greenback facing a prolonged period of underperformance as investors seek alternatives.

S&P 500 closed higher Monday, recovering early-day losses as investors bought the dip in stocks after Moody’s downgraded its investment grade rating on the U.S., ramping up concerns over slowing economic growth and heightened debt levels.

At 4:00 ET (20:00 GMT), the Dow Jones Industrial Average rose 137 points, or 0.1%, the S&P 500 index was 0.1% lower, and the NASDAQ Composite rise 0.02%.  

Moody’s downgrades U.S. rating, cites debt concerns 

Credit rating agency Moody’s downgraded the U.S. sovereign credit rating late last week to ’Aa1’ from ’Aaa’, and is the last of the major agencies to cut the prestigious treble-A rating after awarding it in 1919.

The move pushed Treasury yields higher, but Washington downplayed the downgrade, with Treasury Secretary Scott Bessent calling it a "lagging indicator."

Moody’s cited concerns over the country’s growing $36 trillion debt pile, which could be exacerbated by Trump’s plans to cut taxes.

A Congressional committee in the U.S. House of Representatives approved President Donald Trump’s sweeping tax bill on Sunday, setting it up for a House vote this week amid resistance from a group of Republicans.

This bill is estimated to add between $3 trillion and $5 trillion to the national debt over a decade. 

Moody’s cut was widely criticized by Trump’s administration, which touted several measures to bring down government spending and debt levels. But the measures, especially the Elon Musk-led Department of Government Efficiency, have so far made limited progress. 

Walmart should ‘eat the tariffs’ - Trump 

Trump over the weekend said that Walmart (NYSE:WMT) should absorb price increases stemming from higher import tariffs, and warned the retail giant against any price increases. 

His warning came after Walmart last week said it will not be able to absorb all of the tariff costs, and will need to increase prices on general merchandise coming in from China. Walmart said that even the lower tariffs agreed to by the U.S. and China last week stood to increase prices.

Walmart’s comments highlighted the growing headwinds faced by U.S. companies dependent on imports, as Trump sticks to his tariff agenda. 

Walmart is the world’s biggest retailer and is largely seen as a bellwether for U.S. consumer strength. Its stock fell 1.5%.

Nvidia in spotlight, Reddit slips on downgrade

Nvidia (NASDAQ:NVDA) CEO Jensen Huang on Monday unveiled a host of new artificial intelligence technology -- both for enterprise and consumer applications -- when delivering the keynote address at the Computex AI exhibition in Taiwan.

Speaking for nearly two hours at the event in Taipei, Huang unveiled new AI data center technology, AI cloud and computing products for consumers, as well as AI software for robotic applications.

Unitedhealth Group (NYSE:UNH) rose more than 7% as company insider including new chief executive Stephen Hemsley bought the recent dip in the health insurers stock. 

Reddit Inc (NYSE:RDDT) fell 4% after Wells Fargo downgrade the stock to equal weight from overweight at Wells Fargo, citing a threat from Google (NASDAQ:GOOGL)’s roll out of AI-led search. 

On the economic front, Fed speakers continued to sound the alarm on policy-driven uncertainty from Washington. 

Minneapolis Fed President Neel Kashkari on Monday flagged the Trump administration’s trade policies as significant strain on investor sentiment, undermining the economy’s strong start to the year.  

Peter Nurse, Ambar Warrick contributed to this article.

By Rocky Swift and Kevin Buckland

TOKYO (Reuters) -The U.S. dollar dipped to a one-week low versus the safe-haven yen on Monday as markets digested a surprise downgrade of the U.S. government’s credit rating and as trade friction concerns weighed on sentiment.

Australia’s dollar turned higher following three days of declines ahead of Tuesday’s Reserve Bank of Australia policy announcement, with a quarter-point cut widely expected.

Moody’s cut the United States’ top sovereign credit rating by one notch on Friday, the last of the major ratings agencies to downgrade the country, citing concerns about its growing $36 trillion debt pile.

The news saw the dollar turn lower against its major rivals following four straight winning weeks when it was boosted by rising optimism for U.S. trade deals and then a thaw in relations with China that eased fears of a global recession.

The greenback slipped as much as 0.6% to 144.80 yen for the first time since May 9 on Monday, while the euro gained as much as 0.3% to $1.1199.

"While the decision itself is seen as a catch-up to S&P’s move on 5 August 2011 and Fitch’s announcement to do the same on 1 August 2023, Moody’s decision could still feed USD bears," said Paul Mackel, global head of FX research at HSBC.

"Given this rating erosion has been slow moving, the simple takeaway is Moody’s step should not matter for the USD. But one needs to be careful with this assumption."

U.S. Treasury Secretary Scott Bessent said in television interviews on Sunday that President Donald Trump will impose tariffs at the rate he threatened last month on trading partners that do not negotiate in "good faith."

However, a Financial Times report that the United States had begun serious trade talks with the European Union, breaking a long deadlock, offered some hope for additional deals after Washington inked a framework agreement with Britain earlier this month.

Trump has previously said he has potential deals with India, Japan and South Korea as well, although talks with Tokyo seem to be stumbling over car tariffs.

In the market, "there’s a lot of complacency about the ability to pull off deals," said Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY).

"Confidence that the U.S. economy is going to weather this is very much open to question."

Trump cleared a hurdle towards passing a sweeping tax cut bill that would add an estimated $3 trillion to $5 trillion to the nation’s debt over the next decade, after winning approval from a key congressional committee.

The dollar declined 0.2% to 0.8358 Swiss franc, another safe-haven currency. Sterling added 0.1% to $1.3297.

"The focus on U.S. growth risks and the U.S. administration’s policy agenda may have put the U.S. safe-haven status in question," said Mahjabeen Zaman, head of foreign exchange research at ANZ.

The Australian dollar edged up 0.1% to $0.6413 after sliding more than 1% over the prior three sessions.

Markets have priced in a certainty of a quarter-point cut to the RBA’s 4.10% cash rate on Tuesday, as slowing inflation allows policymakers to respond to rising global risks.

The central bank’s guidance will be key, as investors have reduced their expectations for rapid-fire rate cuts in the coming months following the Sino-U.S. tariff truce and robust Australian employment data.