Investing.com– Asian stocks were mixed on Tuesday, with Chinese stocks jumping on reports of a gradual U.S. tariff increase under Donald Trump, while sharp declines in Japanese shares pressured other regional equities.
Asian shares had fallen sharply in the previous session as investors reassessed the likelihood of U.S. interest rate cuts following stronger-than-expected payroll data released last week.
U.S. stock index futures were higher in Asian trade on Tuesday. Market participants now await a key inflation reading due later this week to assess the Federal Reserve’s interest rate outlook, after it took a hawkish stance in its last meeting.
Chinese shares surge on gradual U.S. tariff increase news
China’s Shanghai Shenzhen CSI 300 index jumped 2%, and Shanghai Composite index climbed 1.8%, while Hong Kong’s Hang Seng index rose 1.5%.
Members of President-elect Donald Trump’s incoming economic team are considering a plan to gradually increase tariffs each month, Bloomberg News reported on Tuesday.
This approach, aimed at enhancing negotiating leverage while minimizing inflation risks, involves monthly tariff hikes of 2% to 5% using executive powers under the International Emergency Economic Powers Act, the report stated.
The proposal is in the preliminary stages and has not yet been presented to Trump, indicating that the concept is still under early consideration.
Trump has vowed to impose a minimum a 60% tariff on Chinese exports.
Focus this week will be on several key economic indicators that will provide insights into China’s economic performance at the close of 2024. The country’s full-year 2024 Gross Domestic Product (GDP) figures are due on Friday. Additionally, December’s industrial production data, and retail sales figures are also due on Friday.
Japan’s Nikkei leads losses as markets scale back Fed rate cut bets
Japan’s Nikkei 225 index slumped 1.7% on Tuesday after returning from a holiday, while TOPIX fell 1.3%.
Australia’s S&P/ASX 200 inched 0.3% higher. Investors await December employment data due on Thursday.
South Korea’s KOSPI was largely unchanged amid an ongoing political crisis in the country.
A Reuters poll showed that the Bank of Korea is expected to lower its base rate by 25 basis points on Thursday, advancing the move by a month, to support South Korea’s struggling economy amid heightened political uncertainty.
Elsewhere in Asia, the Philippines’ PSEi Composite index fell 0.7%, while Singapore’s Straits Times Index edged lower.
Futures for India’s Nifty 50 indicated a muted open on Tuesday.
Asian shares are facing additional downward pressure from prospects of fewer Fed rate cuts in 2025. The Fed reduced rates by 100 basis points in 2024, but signaled fewer-than-expected cuts in 2025 in the face of sticky inflation and a resilient economy.
According to the FedWatch tool, markets now anticipate just one rate cut this year, a sharp adjustment from the earlier expectation of four cuts before the Fed’s December meeting.
