Asian equity markets inched higher on Tuesday as investor sentiment improved slightly following US President Donald Trump's remarks suggesting room for negotiations on newly announced tariff hikes.
Meanwhile, oil prices steadied after Monday’s surge, with traders assessing the combined impact of trade uncertainties and a surprise output move by OPEC+.
The MSCI Asia Pacific Index posted modest gains, supported by advances in Japanese and South Korean equities, both rising as much as 0.3%.
The uptick came after Trump softened his stance on sharply higher tariffs targeting key partners like Japan, South Korea and Malaysia, saying the notifications were “not 100% firm,” according to Bloomberg.
He also delayed their implementation until August 1, hinting at the possibility of further extensions or last-minute deals.
“This is carrot and stick play – stretch the deadline, tighten the grip, and remain focused on a deal to be made,” said Hebe Chen, who’s a market analyst at Vantage Markets, Melbourne.
As per Bloomberg, despite the drama, she further said that the market is still pricing in the likelihood of a resolution within weeks.
The newly announced levies include 25% duties on goods from Japan, South Korea and Malaysia, with even steeper rates on others — up to 40% on Laos and Myanmar.
Yet, global equities have rebounded from their April lows, buoyed by hopes that bilateral deals might be struck before the new measures take effect.
India, which is also in negotiations with Washington, has reportedly made its final offer. Officials cited by Bloomberg say that New Delhi is firm on its red lines, resisting US demands to open up its dairy and auto sectors or allow genetically modified crop imports.
In currencies, the yen edged higher after Monday's sharp fall, while the US dollar slightly retreated. Still, confidence in the dollar remains robust. As quoted by Bloomberg, Wells Fargo strategist Aroop Chatterjee called the recent developments “a perfect storm for a recovery,” as economic data keeps the Federal Reserve on the sidelines.
Oil markets, meanwhile, saw a pullback on Tuesday. Brent crude fell 21 cents to $69.37 a barrel, and US WTI slipped 24 cents to $67.69, after climbing nearly 2% the day before.
As per Reuters, investors remain cautious amid trade jitters and news that OPEC+ will raise output by 548,000 barrels per day in August, a higher hike than previous months.
Although OPEC+ agreed to phase out most of its voluntary 2.2 million bpd cuts, actual increases have mostly come from Saudi Arabia. As per Reuters, Analysts at Goldman Sachs expect a final 550,000 bpd boost for September when the bloc meets again on August 3.
Despite the broader concerns, demand signals remain firm, especially in the US. A record 72.2 million Americans were expected to travel for the July 4 holiday, helping to support oil consumption.
Investor bullishness was also reflected in CFTC data showing net-long positions in crude rising in the week to July 1.
Still, “investors should be alert to headline risk,” cautioned Fawad Razaqzada of City Index and Forex.com, as cited by Bloomberg, underlining that while talks may resume, the threat of renewed volatility remains high.
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