Asian shares edged higher on Tuesday, buoyed by expectations about the US-China trade talks as officials struck a positive tone after the first day of negotiations.
A regional stock gauge rose 0.5% as talks between the US and Chinese officials were set to resume Tuesday. Shares in Hong Kong and China traded within a tight range, while US equity-index futures advanced. The dollar consolidated around levels last seen in 2023. Treasuries steadied after yields on the 10-year US bonds fell in the last session to 4.47% as inflation expectations eased.
The yen declined 0.5% against the dollar after Bank of Japan Governor Kazuo Ueda said Japan’s price trend still has some ways to go to get to its 2% target. Some market participants interpreted those comments as lowering the chances of a rate hike.
While no significant breakthroughs were announced after the first day of talks and stocks pared some of their earlier gains, US officials sounded optimistic about the negotiations. With a key inflation read on tap Wednesday - and the Federal Reserve is entering a blackout period before its June 18 interest-rate decision - money managers are wrestling with what could propel the S&P 500 back to a record after the index soared 20% from its April lows.
“There’s this growing optimism again that the negotiations will ultimately reach an agreement,” said Takeru Ogihara, a Tokyo-based executive strategist at Asset Management One. “If the US and China can come together, it will be a positive development for the global economy.”
The S&P 500 eked out a small gain Monday, remaining nearly 2% away from its February peak.
Apple Inc. slipped over 1% as it didn’t feature any noticeable artificial-intelligence advancements during a developers conference.
US Commerce Secretary Howard Lutnick said discussions between Washington and Beijing were “fruitful” and Treasury Secretary Scott Bessent cited a “good meeting.”
“We are doing well with China. China’s not easy,” President Donald Trump told reporters at the White House on Monday. “I’m only getting good reports.”
Talks will continue into a second day, according to a US official, as the two sides look to ease tensions over shipments of technology and rare earth elements. The advisers will meet again Tuesday at 10 a.m. in London, the official said.
The trade discussion offers another key opportunity for both sides to resolve differences through equal dialogue and negotiation, according to a commentary in the People’s Daily, the flagship newspaper of the Communist Party.
“Markets appear to have priced in a ‘full-success’ scenario - not just on the outcome, but on the rapid progress and Trump’s textbook play: escalate to de-escalate,” said Hebe Chen, market analyst at Vantage Global Prime Pty in Sydney. “For now, even a loose deal seems enough to keep Asian equities climbing.”
Tangible evidence that the tariffs are impacting trade between the two biggest economies came on Monday with data showing Chinese shipments to the US last month had the worst drop in more than five years.
Asian stock markets were, however, more enthusiastic on Monday. A gauge of Chinese shares in Hong Kong entered a bull market - trader parlance for a rise of 20% from a recent low.
Wall Street strategists are also growing optimistic about US stocks, with forecasters at Morgan Stanley and Goldman Sachs Group Inc. suggesting resilient economic growth would limit any pullback over the summer.
Morgan Stanley’s Michael Wilson said a sharp improvement in Corporate America’s earnings outlook bodes well for the S&P 500 into the year end. He reiterated his 12-month price target of 6,500 points. The gauge closed at 6,005.88 Monday.
Meanwhile, a gauge of the dollar steadied Tuesday. A broad weakness in the greenback is shifting attention to several other assets.
Platinum extended its surge as the market for the precious metal strains under signs of severe tightness. Last week, silver jumped to a 13-year high and Bitcoin rose for a fifth consecutive day.
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