Asian stocks mixed as investors brace for tariff deadline, Fed
Early gains for MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab petered out, leaving the index trading flat in the afternoon as traders digested corporate earnings results.
In early European trade, pan-region futures were up 0.15%, German DAX futures rose 0.31% and FTSE futures were flat.
Australian shares (.AXJO), opens new tab closed up 0.7%, while Japan's Nikkei stock index (.N225), opens new tab dipped 0.1% and Hong Kong's Hang Seng Index (.HSI), opens new tab skidded 1.3%.
The euro edged up from a one-month low, rising 0.1% to $1.1555, as markets weighed the EU's trade deal with the Trump administration.
Traders are preparing for several central bank decisions, key economic reports and corporate earnings during the next few days, culminating in U.S. President Donald Trump's August 1 tariff deadline.
The Federal Reserve is expected to leave interest rates unchanged at its policy meeting later on Wednesday, though it could see rare dissent by some central bank officials in favour of lower borrowing costs.
"With labour market conditions near full employment, most Fed officials want to wait and see how tariffs impact inflation," said Tom Kenny, senior international economist at ANZ in Sydney.
Some officials are concerned that tariffs could drive higher inflation expectations, leading to more persistent price pressures rather than a one-off hit, he said on a podcast. "Our expectation is that the Fed should be in a position to cut rates at the September meeting."
U.S. Treasury bonds advanced ahead of the Fed's meeting, pushing yields to the lowest in almost four weeks following a strong auction of seven-year notes that quelled concerns about diminishing demand for government debt.
The yield on benchmark 10-year Treasury notes was last 4.328%, the lowest level since July 3. The two-year yield , which rises with traders' expectations of higher Fed fund rates, was little changed at 3.873%.
The Bank of Japan is expected to keep policy unchanged on Thursday and the focus will be on its comments to gauge when the next rate increase will come after a trade deal between Japan and the U.S. cleared the way for the bank to resume rate hikes.
Ahead of Trump's deadline to reach a deal to avert "Liberation Day" tariffs, some countries' talks with the U.S. looked set to go down to the wire.
U.S. and Chinese officials agreed to seek an extension of their 90-day tariff truce on Tuesday, though no major breakthroughs were announced.
U.S. officials said it was up to Trump to decide whether to extend a trade truce that expires on August 12 or potentially let tariffs shoot back up to triple-digits.
India is also bracing for higher U.S. tariffs — likely between 20% and 25% — on some exports as it holds off on fresh trade concessions ahead of the August 1 deadline, two Indian government sources said.
Meanwhile, three South Korean cabinet-level officials met with U.S. Commerce Secretary Howard Lutnick in a last-ditch push for a deal.
Oil prices rose as potential supply shortages came into focus after Trump gave Moscow an abbreviated deadline toward ending the war in Ukraine. Brent crude futures rose 14 cents, or 0.2%, to $72.40 a barrel.
Earnings were a mixed bag on Wednesday. UBS Group (UBSG.S), opens new tab reported profits, opens new tab that exceeded analysts' expectations, while HSBC profits missed estimates as its losses from China mounted, while German sportswear maker Adidas (ADSGn.DE), opens new tab warned of the impact to its earnings from U.S. tariffs.
U.S. tech megacaps Microsoft (MSFT.O), opens new tab and Meta (META.O), opens new tab are due to report earnings on Wednesday that will set the tone for the rest of the week and the earnings season.
"It's been a solid U.S. reporting season so far, but these megacap names need to run it hot and blow the lights out, given the bar to please has been sufficiently raised," said Chris Weston, head of research at Pepperstone.
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