Markets watch: Asian stocks rise; crude gains as US-China tariff truce lifts sentiment
Asian stocks mostly gained on Tuesday, with Japan's Nikkei 225 (.N225) hitting a record high, after US President Donald Trump extended a tariff truce with China for another 90 days — a move that eased trade tensions between the world's two largest economies and steadied oil prices.
The extension, announced Monday, staves off triple-digit duties on Chinese goods and removes one immediate risk for global markets.
According to news agency Reuters, the truce had been largely expected by investors, who have also been buoyed in recent weeks by resilient US corporate earnings and prospects of interest rate cuts by the Federal Reserve.
Japan's Nikkei was last up 2 per cent as markets reopened after a long weekend, lifted by tech shares and tracking global gains.
Australia's benchmark index (.AXJO) also hit a record high ahead of a central bank policy meeting widely expected to deliver a 25-basis-point rate cut, with another possible by November.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was slightly higher, while China's blue-chip CSI300 (.CSI300) was flat and Hong Kong's Hang Seng (.HSI) dipped 0.1 per cent in early trade.
'The US-China tariff truce extension preserves the status quo for now, so no immediate implications for investment markets,' Shane Oliver, chief economist and head of investment strategy at AMP in Sydney, was quoted as saying by Reuters.
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Oil prices also edged up as the trade extension eased concerns that escalating tariffs would weaken global economic growth and crimp fuel demand. Brent crude futures rose 26 cents, or 0.39 per cent, to $66.89 a barrel, while US West Texas Intermediate (WTI) gained 22 cents, or 0.34 per cent, to $64.18, according to Reuters.
Investors are also watching the August 15 meeting between Trump and Russian President Vladimir Putin in Alaska, aimed at negotiating an end to the war in Ukraine.
'Any peace deal between Russia and Ukraine would end the risk of disruption to Russian oil that has been hovering over the market,' ANZ senior commodity strategist Daniel Hynes wrote in a note, cited by Reuters.
Attention in financial markets will now shift to US consumer price inflation data due later Tuesday. Economists polled by Reuters expect July's core CPI to rise 0.3 per cent month-on-month, faster than June's 0.2 per cent pace.
'CPI will be a key test for market tone. Softer data could give small-caps a lift, but for now, mega-caps remain firmly in control,' said Marc Velan, head of investments at Lucerne Investment Management.
Money markets, according to Bloomberg, are pricing in more than two Fed rate cuts by December, with about a 90 per cent probability of a quarter-point reduction next month.
However, an upside surprise in inflation could temper those expectations.
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The Hindu
12 minutes ago
- The Hindu
U.S. tariff impact not to last more than six months, says CEA Anantha Nageswaran
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The overall resource mobilisation in the economy is not showing any slackening, the CEA said, asking all to look at banks credit growth, commercial paper issuances, and IPO fundraising together. On China On China, Mr. Nageswaran said "we also need to understand the security dimension and look at the $100 billion trade deficit beyond just the number". As a solution, there is a need to diversify the sources of imports and the CEA stressed that the private sector will have a role to play there. Without naming China, he said only one country supplies critical minerals, which are essential for semiconductors, artificial intelligence tech, and added that the supply is "critically unstable". "We cannot go from crude oil import dependence to critical minerals and ladders import dependence. Understand that crude oil (sources) at least is more diversified," he said. "Indian policy makers must choose between accepting permanent strategic dependence on adversaries or committing the resources necessary for genuine support to independence," Nageswaran said. Stating that AI will cause labour displacement, Nageswaran pitched for caution in AI adoption and added that "we will have to choose the areas in which we allow AI to be deployed and harnessed, and also the speed with which we do so". There is a need to create at least 80 lakh new jobs per annum in the next 10-12 years, he added.
Mint
12 minutes ago
- Mint
IEA lifts global oil supply forecast, signaling bigger surplus ahead
Next Story Giulia Petroni , The Wall Street Journal Global oil markets are poised for a larger surplus than previously expected this year, with supply set to grow more than three times faster than demand, the International Energy Agency said. The IEA raised its estimates for OPEC+ supply growth by 370,000 barrels a day for this year and by 520,000 barrels a day for the next, reflecting a faster-than-anticipated unwinding of voluntary cuts. (File Photo: Reuters) Gift this article Global oil markets are poised for a larger surplus than previously expected this year, with supply set to grow more than three times faster than demand, the International Energy Agency said in its closely watched monthly report. Global oil markets are poised for a larger surplus than previously expected this year, with supply set to grow more than three times faster than demand, the International Energy Agency said in its closely watched monthly report. The Paris-based organization now forecasts oil supply growth of 2.5 million barrels a day this year and 1.9 million the next, from earlier estimates of 2.1 million and 1.3 million barrels a day, respectively. The revision follows OPEC+'s latest bumper output hike, though countries outside of the alliance remain the primary drivers of growth. Supply was largely steady in July, as declines in OPEC+ output were offset by increased production from non-OPEC+ producers. Saudi Arabia's output fell from June's highs, when several Gulf producers boosted exports over fears of supply disruptions in the Strait of Hormuz. The IEA raised its estimates for OPEC+ supply growth by 370,000 barrels a day for this year and by 520,000 barrels a day for the next, reflecting a faster-than-anticipated unwinding of voluntary cuts. The alliance recently agreed to another super-sized hike for September in a push for market share, fueling concerns about a supply glut in the coming months. However, despite the unwinding of nearly 1.4 million barrels a day of cuts on paper from April to July, the IEA said only 640,000 barrels a day of additional crude production actually hit the market. The supply growth forecast for non-OPEC+ producers was trimmed by 10,000 barrels a day to 1.3 million this year, but raised to 1 million barrels a day from 940,000 previously for next year, largely due to higher U.S. output. Wednesday's report comes as Brent crude trades around $66 a barrel, while West Texas Intermediate is at $63 a barrel, as investors await President Trump's meeting with Russian President Vladimir Putin to discuss the war in Ukraine. 'Oil prices have been caught in the crosshairs of fast-changing market dynamics," the IEA said. 'While new sanctions on Russia and Iran threaten to impact trade flows, weaker economic growth is poised to temper demand." Iranian oil supply rebounded from the low levels seen in June following the 12-day conflict with Israel, and U.S. pressure has yet to significantly dent exports, according to the agency. Russian crude supplies remained broadly steady in July, though announced and threatened sanctions could curb output and revenue later this year. The IEA expects Russian production to align with its OPEC+ target, averaging just under 9.4 million barrels a day for the remainder of the year. Meanwhile, global oil demand growth is expected to slow further, largely due to a weaker macroeconomic outlook. The slump is particularly evident in China, India, and Brazil, after June and July data came in weaker than expected, according to the agency. 'The latest data show lackluster demand across the major economies and, with consumer confidence still depressed, a sharp rebound appears remote," it said. Demand is forecast to grow by 685,000 barrels a day this year and by 699,000 barrels a day the next, from previous estimates of 704,000 and 722,000 barrels a day, respectively. The IEA's projections are well below OPEC's. Global oil inventories climbed for the fifth consecutive month in June, hitting a 46-month high of 7.8 million barrels. The increase was fueled by growing volumes of oil at sea, and rising stockpiles of both Chinese crude and U.S. gas liquids, the IEA said. Write to Giulia Petroni at Topics You May Be Interested In Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Mint
12 minutes ago
- Mint
The ultimate guide to the Trump tariff fallout: Trade wars, Russian oil, and India-US ties
New Delhi: A fortnight after Donald Trump won the US presidential election in November 2024, Rahul Roy-Chaudhuri, a senior fellow at the International Institute for Strategic Studies, was speaking at a global conference on Trump in Naples, Italy. 'I noticed that the Europeans were very pessimistic, whereas the Indians were optimistic—cautious, but optimistic. They were upbeat about Trump," said Roy-Chaudhuri, a specialist in South Asian affairs, who was presenting a paper on the Indian perspective. Now, days after Trump announced a stiff new tariff regime and secondary sanctions against India, the London-based strategic analyst wonders, 'Did we get that wrong? Were the Europeans right after all?" He's not the only one left bewildered by Trump's measures—although this story is still developing, with a myriad unknowns that could tip the scales in favour of India. Why us, is a common refrain heard among civil servants and businesses in New Delhi these days, although some say India should have seen this coming, and drawn hard lessons from Trump's first term, when he forced India to lower tariffs on US-made Harley Davidson motorcycles and bourbon whisky. Back when Trump first made a bid for the US presidency in 2016, India and Indians leapt to his aid. With the ruling Bharatiya Janata Party champing at the bit to craft a new foreign policy that would eject ideology in favour of trade and business, the moment seemed opportune. Hell, you could even say auspicious. Some in India publicly prayed for Trump's victory with garlands, chants and conch-shells. In the US, meanwhile, influential Indian-origin supporters of his Republican Party swiftly swung into action helping organise glamorous fund raisers and public meetings. Back then, it seemed, India couldn't put a foot wrong as both countries forged closer ties against the backdrop of Chinese belligerence in India's neighbourhood and the Asia-Pacific region. But seven months into his second term, Trump has hiked tariffs on some Indian imports to 25% and imposed secondary sanctions in the form of another 25% tariffs for purchases of sanctioned Russian oil, which are set to kick in on 27 August. Announced in the middle of US-India negotiations on a bilateral trade agreement (BTA) that the two sides expect will take mutual trade to $500 billion by 2030, India called the move 'unfair, unjustified and unreasonable". Mint breaks down the tariff war, the future of bilateral trade, India's (and the world's) energy trade with Russia, the changing landscape of foreign policy, and what could heal the injured Indo-US ties. What went wrong 'There was a mismatch of expectations around the bread and butter issues of the trade agreement," said Pankaj Saran, former deputy national security adviser and ex-ambassador to Russia. 'Even the first time around (the first Trump presidency), we had a difficult experience. This time, we were mindful of past experience and offered a generous package, with a lot of concessions. The Americans admitted they had received it but they were unsure how to handle it internally." Not just Americans and Indians, no one's quite sure how to deal with the most mercurial US presidency in living memory. But the reversal in India-US ties, as India pushed back on American demands to open up its market for agricultural produce and allow genetically modified (GM) products, has been stunning. 'There is no precedent," said Saran. 'Trump's mode of operation is that there is no last word. It is a combination of strategies involving a mix of carrot, stick and public admonition. For him, it seems, outcomes are more important." Who needs Russia more? Both Europe and America continue to buy vital commodities from Russia. America, for instance, continues to import Russian enriched uranium, plutonium, fertilisers and palladium, a key mineral used in catalytic converters in vehicles. And although European Union (EU) imports from Russia have fallen 86% since the first quarter of 2022, when Russia invaded Ukraine, Reuters reported on 6 August that the 27-nation grouping continues to buy Russian oil, nickel, natural gas, fertilizer, iron and steel from Russia. In fact, according to energy trade data tracked by the Centre for Research on Energy and Clean Air, a non-profit think-tank founded in Helsinki, the EU was the world's leading buyer of Russian LNG and piped gas—key to heating up countries with growing ageing populations and harsh winters. Indian purchases were convenient for the US and EU, which bought products refined in India from Russian crude, while global prices were shored up. As Eric Garcetti, who was US ambassador to India under former President Joe Biden, told the Washington-based Council on Foreign Relations in May 2024, 'They [India] bought Russian oil because we wanted someone to buy Russian oil at a price cap—that was not a violation or anything, that was actually the design of the policy, because as a commodity, we did not want the price of oil to go up. They fulfilled that." Trump's political priorities Trump wants to address three overarching domestic problems by the tariffs—trade balance, budget deficit and his fiscal problem, said Mohandas Pai, chairman of Aarin Capital. 'He wants to reduce the trade deficit with India ($45.8 bn in 2024) by cutting imports. But the US has very little to export except high-tech products, defence equipment and aircraft. Trump seems to have forgotten the 450 Boeing aircraft orders India has already placed," Pai said. 'Tariffs don't work' There are several dimensions to the current political problems that the Trump administration is attempting to solve, and pivoting to just one, that is restricting imports, will not solve problems that are large and generic in nature, said Neelkanth Mishra, chief economist at Axis Bank. 'The Americans have forgotten that tariffs don't work. If anyone thinks that the profit pools of exporters to the US or American firms importing goods are so large that $500-600 billion of tariffs can be absorbed, then they are completely mistaken. These are efficient markets, and therefore have thin margins." Figures released by the non-partisan Congressional Budget Office, analysed by Fox News, showed that the US budget deficit ballooned by $109 billion to $1.6 trillion in the first 10 months of FY25 compared with the same period a year ago, despite the tariffs. Spending rose by $372 billion over this period, led by expenditure on benefits, including for medical aid for America's ageing population. National debt surged $60 billion to $37 trillion. Inflation is coming Cost escalations are set to be passed on to American consumers. According to research by The Budget Lab, an independent think tank of Yale University, published on 7 August, American consumers are set to bear an overall average effective tariff rate of 18.6%, the highest since 1933. After taking into account changes in consumer spending patterns, influenced by factors like income and prices, the average tariff rate will be 17.7%, the highest since 1934. This is not good news for Indian exports either. The tariffs disproportionately impact labour-intensive clothing and textiles, with US consumers facing 39% higher shoe prices and 37% higher apparel prices over the next two years. Not surprisingly, Trump has spared two sectors from high tariffs, pharmaceuticals and smartphones, unwilling to tinker with cheap Indian-made generic drugs and mobile phones prices. The prize for peace Things could turn around very quickly for India if a planned 15-August summit between Trump and Russian president Vladimir Putin manages to strike a peace deal—an outcome that should scotch at a stroke the raison d'être for secondary sanctions. It is not known if Ukrainian president Volodymyr Zelensky, who has European backing, will attend. Indian Prime Minister Narendra Modi and Zelensky had a conversation on Monday, following which the Ukrainian leader said on X, 'I had a long conversation with the Prime Minister of India. We discussed in detail all important issues—both of our bilateral cooperation and the overall diplomatic situation. I am grateful to the Prime Minister for his warm words of support for our people. It is important that India is supporting our peace efforts and shares the position that everything concerning Ukraine must be decided with Ukraine's participation. Other formats will not deliver results." To be sure, even if the peace deal goes through, which would be a massive feather in Trump's world peace-building cap and Nobel peace prize aspirations, it is not clear if Washington would withdraw the 25% tariffs. The 'superimposition' shock Analysts say signs of Trump's tariff obsession have long been strewn around global trade channels. He began calling India the 'tariff king" in his first presidency and, continuing to riff on the theme, made clear in the hustings last year that he will stop countries from selling goods on the cheap in America, a key pledge that pleased his core MAGA (Make America Great Again) constituency. Rather, it is the non-trade stuff, chiefly the way Trump handled the aftermath of this year's India-Pakistan conflict, that came as a shock—an intrusion that Saran calls 'the superimposition of the political aspect". This was marked by Trump's repeated claims to have helped end the conflict, denied by New Delhi, which views Kashmir mediation as a red line, and his hosting the Pakistan army chief, Gen. Asim Munir, at the White House. The man later issued outrageous nuclear threats from American soil. 'There's no doubt that Pakistan has come up in the political relationship (with America)," said Saran in comments made before Munir's nuclear threats. 'Trump probably found the India-Pakistan conflict to be a geo-political surprise, and he is convinced about the American role in ending it. The difference between the Indian and Pakistani approach to this was sharp. The disagreements began with trade, and political aspects were superimposed on it." White House spokeswoman Anna Kelly said Trump hosted Munir after he called for the president to be nominated for the Nobel Peace Prize. According to Roy-Chaudhuri of IISS, New Delhi may have 'mismanaged massaging his (Trump's) ego". How to heal With India seen by much of the world as key to addressing the negative impact of a fragmented world described by some experts as a fallout of 'deglobalization," its relationship with the US will be keenly watched. For ties to heal, some suggest looking at some of the domestic economic areas that have emerged as irritants. 'Politicians, like markets, tend to be forward-looking," said Mishra, asked if tariffs could spur domestic reforms. 'Consensus needs an external pressure to allow the government to go through meaningful reforms, in agriculture and GM crops for instance. We've been reluctant to change. Why not change now? In manufacturing, we should be looking at domestic demand. The assumption everyone makes is that manufacturing is chiefly for exports—that is wrong. Export competitiveness is important for better productivity, but exports as a source of end-demand are unlikely to be large enough." To be sure, introducing such reforms in India won't be easy. New Delhi, after all, chose to walk out of the Doha Round of trade talks in 2008 rather than give in to American pressure on agriculture. China supported the Indian position against the US then, and something similar may be happening this time around too, with four of the Brics Plus grouping founders— Brazil, Russia, India and China—reportedly eyeing a response to tariffs. Trump is deeply suspicious of Brics, viewing it as anti-American, and this has emerged as another sticking point in India-US ties. But the Russian ambassador to India told a recent meeting on Brics, organised by the India Foundation, more than once that 'de-dollarization (finding an alternative to the global currency of trade) was never a Brics proposal". Pai recommends keeping the temperature down. 'India and the US are joined at the hips when it comes to technology. As many as 25 major US tech companies have Indian-origin CEOs," said Pai, whose Aarin Capital is an investor in technology-intensive businesses. 'It's a temporary set-back. In India, there's a lot of pride; we are not deal-driven." A test ahead 'Trump's Presidency is a work in progress," said Saran. 'You have to play with the cards you are dealt. We have to find our own equilibrium with President Trump, and be careful not to make matters worse. Indian diplomacy will be strongly tested in the coming years, with flashes from the Cold War years, now fuelled by terrorism, threatening to cloud what promised to be a new era of growth-fuelled development. Equally, with a mercurial US president, things could swing right back to a more predictable and respectful relationship. But even amid the current uncertainty, Indian diplomats can draw satisfaction from the fact that an increasingly multipolar world sees India as a shining example of economic progress. And that's something even Trump cannot ignore.
