Asian stocks, US futures rise on Japan trade deal

Synopsis

Asian shares experienced a boost following President Trump's announcement of a trade deal with Japan, easing concerns about the tariff war. The agreement involves Japan investing $550 billion into the US and setting tariffs on Japanese imports at 15%. This development has fueled positive market sentiment across Asia, with expectations of further trade agreements.

Asian shares rose at the open after President Donald Trump said the US reached a trade deal with Japan, an agreement with a key trading partner that will ease concerns about the tariff war.

The MSCI gauge of Asian shares gained 0.7% with the Nikkei-225 in Japan jumping as much as 1.8%. The yen fluctuated after initially gaining on Trump’s announcement. Contracts for the S&P 500 rose 0.2% on the deal. The US benchmark closed at a record high in the last session. A gauge of the dollar edged up 0.1% while yields on the 10-year Treasury advanced 1 basis point to 4.36%.

“We just completed a massive Deal with Japan, perhaps the largest Deal ever made,” Trump said in a Truth Social post. On Tuesday, Trump also unveiled an agreement with the Philippines setting a 19% tariff on the country’s exports.

The deal with Japan will see the key American ally invest $550 billion into the US and will set tariffs on Japanese imports at 15%, Trump wrote. Stocks have run up since their April slump on expectations countries will strike agreements with the US ahead of the Aug. 1 deadline, and help avoid significant damage to company earnings and the economy.

“In addition to lowering tariffs on Japan from 25% to 15%, the deal removes an element of uncertainty for the market,” said Tim Waterer, chief market analyst at KCM Trade. “This deal is good for market sentiment across Asia on expectations that others may follow.”

Investors are also focused on megacap companies this week. Big tech’s strength will be on full display over the next few weeks as the group begins unveiling quarterly earnings. Tesla Inc. and Alphabet Inc. are reporting Wednesday.

The so-called Magnificent Seven companies are expected to post a combined 14% rise in second-quarter profits, while earnings for the rest of the US equity benchmark are predicted to be relatively flat, according to Bloomberg Intelligence data.

Attention in Japan will also be on the 40-year government bond auction on Wednesday. That will be the first test of appetite for super-long debt following a historic election defeat for Prime Minister Shigeru Ishiba. Investors remain concerned over the outlook of bonds in one of the most indebted developed nations amid expectations of higher government spending as Ishiba tries to placate disaffected voters.

Ishiba will soon decide on his future after assessing the status of negotiations on tariffs with the US, Yomiuri reported before Trump’s announcement.

Meanwhile, US Treasury Secretary Scott Bessent said he will meet his Chinese counterparts for trade talks in Stockholm next week, and will “be working out what is likely an extension” to the current Aug. 12 deadline for negotiations. He also said that the negotiations with China can now take on a broader array of topics, potentially including Beijing’s continued purchases of “sanctioned” oil from Russia and Iran.

Bessent told Fox Business he saw no reason for Fed Chair Jerome Powell to step down. Meanwhile, Trump stressed his belief that the Fed’s benchmark rate should be 3 percentage points lower. Bessent, in the same Oval Office event, said that “based on the way they cut rates last fall, they should be cutting rates now.”

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