Asian stocks opened higher after a US-China tariff truce offered relief to markets ahead of a key US inflation report expected to shape the Federal Reserve’s interest-rate path.
The MSCI Asia Pacific Index rose 0.4% as the Nikkei-225 index soared to a record high with Japan returning from a holiday Monday. The dollar edged lower while Treasuries were little changed at the open. Gold gained 0.4%.
Chinese shares will be in focus after President Donald Trump extended the pause on tariffs for another 90 days, pushing the deadline into early November. The move removes one source of uncertainty for markets, which are now turning to economic data for clues on whether tariffs are affecting prices and what the Fed will do at its September meeting.
“For now, the markets are pleased that progress is being made to extend the August 12 deadline, but this is by no means certain and no deal has been signed,” said Seb Mullins, Schroders’ head of multi-asset and fixed income in Australia. “The China trade deal is the most likely to flare up again, which will have the greatest impact on total US tariffs.”
Trump extended a pause of sky-high tariffs on Chinese goods, stabilizing trade ties between the world’s two largest economies. Trump signed an order extending the truce through Nov. 10, deferring a tariff hike set for Tuesday.
The de-escalation first took effect when the US and China agreed to reduce tit-for-tat tariff hikes and ease export restrictions on rare earth magnets and certain technologies.
“All other elements of the Agreement will remain the same,” Trump said in a Truth Social post.
Attention will shift to inflation data later Tuesday, which is forecast to show American consumers saw a slight pickup in inflation as retailers gradually raised prices on a variety of items subject to higher import duties.
“The market’s reaction to any surprises in the numbers could be exaggerated — especially if a significantly hotter-than-expected CPI print leads traders to believe the Fed may not cut rates at its next meeting,” said Chris Larkin at E*Trade from Morgan Stanley.
The core consumer price index in the US, regarded as a measure of underlying inflation because it strips out volatile food and energy costs, will show a 0.3% increase for July, according to the median projection in a Bloomberg survey of economists.
Money markets show traders have priced in more than two rate reductions by December, with about a 90% probability of a quarter-point Fed cut next month. The latest jobs report also pointed to a sharp cooling in the labor market over the last few months. Policymakers left rates unchanged at the end of July.
“There is no doubt about it, CPI will not be good,” said Andrew Brenner at NatAlliance Securities. “The bigger question is ‘does it matter?’ We think not.”
Meanwhile, the Fed’s two vice chairs, Michelle Bowman and Philip Jefferson, and Dallas Fed President Lorie Logan are under consideration to serve as chair of the central bank when the position opens next year, according to two administration officials. Treasury Secretary Scott Bessent will interview additional candidates in the coming weeks, said the officials.
Trump named EJ Antoni, chief economist of the conservative Heritage Foundation, to lead the Bureau of Labor Statistics after firing the former head of the agency earlier this month.
Gold held a loss after Trump said imports of bullion won’t be subject to US tariffs, although traders were still waiting for formal clarification over the policy following a federal ruling last week that sowed chaos and confusion across the market.
Elsewhere, Australia’s central bank is poised to deliver its third interest-rate cut this year on Tuesday as inflationary pressures ebb, while Governor Michele Bullock is expected to stick with her cautious stance on the monetary policy outlook.
On the geopolitical front, Trump downplayed expectations for his upcoming meeting with Russian leader Vladimir Putin as he seeks to end the war in Ukraine. Trump cast it as a “feel-out meeting” and saying he would confer with Ukrainian and European leaders after the sitdown.
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