Asia-Pacific markets were mixed on Thursday. That was in the wake of the Wall Street rally powered by optimism over a potential thaw in the still-unfolding U.S.-China trade war. Recent comments made by U.S. President Donald Trump are what ignited this optimism. He signaled that he is open to the idea of exemptions for automakers from the tariffs that were announced before Thanksgiving. This latest example is compounded by an announcement last week from Treasury Secretary Scott Bessent, calling for a “big deal” on trade between the two countries.
The Dow was up 419.59 points, or 1.07%, to finish at 39,606.57. The S&P 500 rose 1.67% to close at 5,375.86 and the Nasdaq Composite jumped by 2.50%, closing at 16,708.05. Looking at Asia, Japan’s Nikkei 225 was up a mild 0.49%. It finished up 300 points at 35,039.15, building on those positive returns from Wednesday.
Specifically on trade policy, President Trump has dropped some heavy hints that he is planning to dial back his administration’s anti-China offensive. And automakers will likely be able to get exemptions from the tariffs. This relief would provide much welcomed additional support to the auto sector. Trump clarified that he does not intend to remove Federal Reserve Chair Jerome Powell from his role, emphasizing stability within the central bank leadership.
Scott Bessent sounded a note of optimism by pointing to the possibility of a great U.S.-China trade agreement. His optimism aligns with recent signals from China, indicating openness to trade discussions. They cautioned that negotiations would not proceed under threats from the U.S.
“China’s attitude towards the tariff war launched by the U.S. is quite clear: We don’t want to fight, but we are not afraid of it. If we fight, we will fight to the end; if we talk, the door is wide open,” – Guo Jiakun, via Lisa Kailai Han
As Simon Evenett, founder of The St. Gallen Endowment for Prosperity Through Trade, so pointedly observed. He added that the likelihood of China rerouting products originally intended for the U.S. to other markets is extremely slim. He emphasized that none of these 101 products are subject to redirection’s significant risk. To date, a large share of these products are sourced from non-strategic sectors such as footwear and paper napkins. Specifically for half of these products, they are already losing market share in the U.S.
Japan’s Tokyo Stock Exchange (TSE) is in the process of actively courting smaller, more retail-friendly investments. In addition, they are encouraging listed companies to lower their minimum investment thresholds. Military transport current guidelines recommend that this threshold should be below 500,000 yen (~$3,500). This program seeks to develop an investment ecosystem that is welcoming and accessible to a more diverse class of investors — including many more young people.
“TSE will create an environment that is conducive to investment for a diverse range of individuals, including young people,” – a group formed by the TSE composed of market experts
Japan and Wall Street are soaring – literally. The economic picture in South Korea is very grim, with its economy shrinking by 0.1% y-o-y in Q1 2023. That marks the first negative quarter since Q4 2020.
The Asia-Pacific markets are reacting to these advances. Investors are on edge but optimistic as the U.S. and China prepare for trade war negotiations. The rapidly changing landscape offers both countries great potential, should they choose to overcome their differences in a spirit of creativity and positive collaboration.
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