Nikkei, EU stocks surge as US-Japan trade deal avoids the worst
President Donald Trump on Tuesday said a trade deal with Tokyo will include Japan paying a lower-than-threatened 15 per cent tariff on shipments to the US It followed an agreement with the Philippines that will see the US collect a 19 per cent tariff rate on imports from there.
Trump also said representatives from the European Union were coming for trade negotiations on Wednesday. That stirred hopes for a deal with Europe, even as the EU was reportedly refining countermeasures in case of a deadlock before the August 1 deadline.
EUROSTOXX 50 futures jumped 1.3 per cent, while Germany's DAX futures climbed 0.6 per cent.
"Expectations for a breakthrough (on the US-Japan talks) were low, so Trump's announcement delivers a mild upside surprise — providing near-term relief for Japanese equities," said Charu Chanana, chief investment strategist at Saxo.
"Strategically, the deal allows Japan to sidestep immediate tariff escalation, while Trump's attention shifts elsewhere."
Japan's Nikkei bolted 3.7 per cent higher as shares of automakers surged on news the deal would cut the US auto tariff to 15 per cent, from a proposed 25 per cent. Mazda Motor rallied 17 per cent, while Toyota Motor jumped 13.6 per cent.
South Korean automakers also rallied as the Japan deal fuelled optimism over potential progress in tariff negotiations between South Korea and the United States.
Analysts noted the trade deal reduced a major risk to the fragile Japanese economy, providing more scope for the Bank of Japan to raise interest rates to fight inflation.
That slugged the bond market, with yields for 10-year JGBs rising a whopping 8.5 basis point to 1.585 per cent.
There were also reports Japanese Prime Minister Shigeru Ishiba would soon step down to take responsibility for the ruling coalition's defeat in Sunday's upper house election.
The political uncertainty reversed an early trade-inspired rise in the yen and helped the dollar nudge up 0.2 per cent to 146.95 .
Saxo's Chanana said Ishiba's departure could set the stage for leadership more aligned with pro-market policies and closer US ties.
"His exit is also seen as clearing a path for continuity in Japan's accommodative fiscal and monetary stance."
EXTENDED DEADLINES
In another positive development, US and Chinese officials will meet in Stockholm next week to discuss an extension to the August 12 deadline for negotiating a trade deal, Treasury Secretary Scott Bessent said.
Chinese blue-chips rose 0.7 per cent and Hong Kong's Hang Seng index gained 0.8 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan added 1.0 per cent.
Wall Street was more restrained with S&P 500 futures up 0.2 per cent, while Nasdaq futures added 0.1 per cent.
US corporate earnings reports were showing signs that Trump's trade war was hitting profit margins. General Motors tumbled 8.1 per cent after the automaker reported a US$1 billion hit from tariffs to its quarterly results.
Investors are now awaiting results from Tesla and Google's parent Alphabet - two of the Magnificent 7 stocks that have driven much of the market rally fuelled by AI optimism.
In the foreign exchange market, the dollar consolidated having slipped overnight in line with Treasury yields. The dollar index was a shade firmer at 97.45, after losing 0.4 per cent on Tuesday in its third session of declines.
The euro dipped 0.1 per cent to US$1.1737, after rising 0.5 per cent the previous day. The European Central Bank is expected to hold rates steady on Thursday after eight consecutive rate cuts, with the prospect of steeper-than-expected US tariffs looming.
Benchmark 10-year US Treasury yields ticked up 2 basis points to 4.36 per cent, after slipping 3 bps overnight.
While Trump continued to lash out at Federal Reserve Chair Jerome Powell for not cutting interest rates, Bessent said there was no need for Powell to step down immediately and could stay until next May if he chose.
Investors have been worried the politicisation of the Fed could ultimately lead to rates being cut too far, fuelling inflation and pushing up long-term borrowing costs.
In commodity markets, Spot gold prices eased a touch to US$3,422 an ounce.
Oil prices nudged higher, helped by rising prices for diesel in the US where stockpiles are at their lowest levels for this time of the year since 1996.
US crude rose 0.4 per cent to US$65.60 per barrel, while Brent was at US$68.88 per barrel, up 0.4 per cent.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
15 minutes ago
- New Straits Times
Special Thailand-Cambodia meeting begins in Putrajaya
PUTRAJAYA: A special meeting involving Thailand and Cambodia to discuss a ceasefire over their ongoing conflict, with Malaysia acting as mediator, began at 3.15pm today. The meeting involved Cambodian Prime Minister Hun Manet and acting Thailand Prime Minister Phumtham Wechayachai, with Datuk Seri Anwar Ibrahim serving as host, Asean Chair, and witness. Also present were United States Ambassador to Malaysia Edgard D. Kagan and Chinese Ambassador to Malaysia Ouyang Yujing.
New Straits Times
15 minutes ago
- New Straits Times
New Zealand plans to scrap card payment surcharges
SYDNEY: The New Zealand government on Monday proposed to ban surcharges on most in-store payments made using debit and credit cards from May next year, a move it said could save roughly NZ$150 million (US$90.20 million) for Kiwi consumers. The plan follows the decision last year by New Zealand's Commerce Commission to lower fees that local businesses pay to accept Visa and Mastercard payments. "We are scrapping surcharges at the till. New Zealanders are paying up to NZ$150 million in surcharges every year. That's money that could be saved or spent elsewhere," Prime Minister Christopher Luxon told reporters. "You no longer will be penalised for your choice of payment method, whether that's tapping, swiping, or using your phone's digital wallet." Visa and Mastercard both welcomed the decision. Banning surcharges was "a welcome win for transparency and fairness at the checkout for consumers and reflects Visa's long-held view on surcharging globally," Anthony Watson, country manager for New Zealand and South Pacific, said. A spokesperson for Mastercard said the ban aligns New Zealand "with other leading economies at a time when payment acceptance costs have never been lower". The proposed ban will not include online payments or transactions made using foreign-issued cards, prepaid, travel and gift cards. New Zealand's Commerce Commission estimates consumers pay about NZ$150 million in surcharges annually, including up to NZ$65 million in excessive surcharges. "Surcharges cover the fees businesses pay for accepting contactless payments and credit cards, but we know these are often excessive. In some cases, the retailer doesn't even make it clear what the percentage is," Commerce Minister Scott Simpson said in a statement. The government plans to introduce the bill to ban most card surcharges by the end of this year. Shops in New Zealand typically charge consumers around 0.7 per cent for debit card payments and up to 2 per cent for credit card payments, according to New Zealand's Commerce Commission. Australia's central bank this month proposed to scrap surcharges on most debit and credit card payments for consumers, saying it no longer achieved the intended purpose of steering consumers to make more efficient payment choices.
New Straits Times
15 minutes ago
- New Straits Times
Stock markets boosted after EU, US strike trade deal
HONG KONG: Stock markets rose in Europe and Asia on Monday after the European Union and United States hammered out a deal to avert a potentially damaging trade war. News of the deal, announced by Donald Trump and European Commission head Ursula von der Leyen on Sunday, followed a series of US trade agreements last week, including with Japan, and comes ahead of a new round of China-US talks. Investors were also gearing up for a busy week of data, central bank decisions and earnings from some of the world's biggest companies. Trump and von der Leyen announced at his golf resort in Scotland that a baseline tariff of 15 per cent would be levied on EU exports to the United States. "We've reached a deal. It's a good deal for everybody. This is probably the biggest deal ever reached in any capacity," Trump said, adding that the levies would apply across the board, including for Europe's crucial automobile sector, pharmaceuticals and semiconductors. Brussels also agreed to purchase US$750 billion worth of energy from the United States, as well as make US$600 billion in additional investments. "It's a good deal," von der Leyen said. "It will bring stability. It will bring predictability. That's very important for our businesses on both sides of the Atlantic." Equities built on their recent rally, fanned by relief that countries were reaching deals with Washington. Paris rose more than one per cent at the open, with Frankfurt and London also tracking gains in Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei and Jakarta. Tokyo fell for a second day, having soared about five per cent on Wednesday and Thursday in reaction to Japan's US deal. Singapore, Manila and Mumbai were also lower. The broad gains came after another record day for the S&P 500 and Nasdaq on Wall Street. "The news flow from both the extension with China and the agreement with the EU is clearly market-friendly, and should put further upside potential into the euro... and should also put renewed upside into EU equities," said Chris Weston at Pepperstone. Traders are gearing up for a packed week, with a delegation including US Treasury Secretary Scott Bessent holding fresh trade talks with a Chinese team headed by Vice Premier He Lifeng in Stockholm. While in April both countries imposed tariffs that reached triple digits, US duties this year have temporarily been lowered to 30 per cent and China's countermeasures slashed to 10 per cent. The 90-day truce, instituted after talks in Geneva in May, is set to expire on Aug12, 2025. Also on the agenda are earnings from tech titans Amazon, Apple, Meta and Microsoft, as well as data on US economic growth and jobs. The Federal Reserve's latest policy meeting is expected to conclude with officials standing pat on interest rates, though investors are keen to see what their views are on the outlook for the rest of the year in light of Trump's tariffs and recent trade deals. "We think the data supports a Fed on hold in July, but absent a significant upside surprise in the upcoming inflation data, September could be a 'live' meeting for a resumption of rate cuts, especially if economic activity data and possibly overwhelming political pressure force the Fed's hand," said Michael Krautzberger at Allianz. The Bank of Japan is also forecast to hold off on any big moves on borrowing costs.
