Asian stocks, US futures rise as trade talks progress

Synopsis

Asian stocks experienced gains, mirroring the rise in equity-index futures, fueled by record-high US stock performance and positive developments in trade negotiations. Japan's Nikkei 225 index saw a significant jump following extended trade talks. Meanwhile, crude oil prices declined as traders adjusted risk premiums ahead of the OPEC+ meeting, and US Treasuries experienced a slight dip.

Asian stocks rose along with equity-index futures as record-high US stocks and progress in trade negotiations boosted risk appetite.

The MSCI Asia-Pacific index advanced 0.3% at the open Monday. The Nikkei 225 index jumped by more than 1% after Japan’s top negotiator extended his stay in the US for further trade talks ahead of a July 9 deadline. Contracts for the S&P 500 index and the Nasdaq 100 rose 0.3%. A gauge of the dollar dipped 0.1% as Senate negotiations continued over President Donald Trump’s $4.5 trillion tax-cut package.

Crude oil fell 1% as traders wound back risk premiums before the OPEC+ meeting. Treasuries slipped, with the yield on the 10-year rising about 1 basis point to 4.28%.

On Friday, US stocks rose to a fresh all-time high for the first time since February, underscoring the conviction the economy is withstanding policy uncertainties. Trump in April put tariffs on dozens of trading partners on pause for three months, providing a boost for equities. A gauge of Asian stocks is set to climb more than 4% for a second month as investors look past tariff angst and recent tensions the Middle East.

“The momentum and trends seen in risky markets portray an almost nirvana environment in which to operate,” Chris Weston, head of research at Pepperstone Group, wrote in a note. Rapid reduction of geopolitical risks and expectations about imminent trade deals are “all adding tailwinds to risk markets.”

India’s trade team extended its stay in Washington to iron out differences as the two sides look to clinch a deal before the July 9 deadline, people familiar with the matter said. Trump also said he doesn’t think he’ll need to extend the deadline.

The market’s resilience may be seen as complacent with traders “eating up” the Trump administration’s rhetoric, said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. Markets could trend higher should the aggregate tariff rate fall following the deadline, or face “some reversal” if deals don’t materialize, he said.

Lower-than-expected US inflation and easing uncertainty in trade tensions have helped improve market sentiment this month. The S&P 500 index has gained 10% this quarter, its sixth advance in seven quarters. A gauge of the dollar has tumbled 6.3% this quarter, on pace for its biggest decline since December 2022.

“The recent conflict in the Middle East is a reminder, both that new policy shocks can surface, but also that unless the worst outcomes materialize, they can create a ‘wall of worry’ for markets to climb,” Goldman Sachs Group Inc. strategists including Kamakshya Trivedi wrote in a note.

Separately, negotiations over Trump’s tax cut bill are continuing as Republicans seek to convince holdouts to support it for final passage, with a vote set to spill into Monday. The nonpartisan Congressional Budget Office estimates the measure would add nearly $3.3 trillion to US deficits over a decade.

Eyes will soon shift to Chinese manufacturing and non-manufacturing PMIs later Monday as traders assess the impact Trump’s trade war on its economy.

“Market participants will closely watch if new export orders in the manufacturing PMIs recover further after the US and China agreed on a trade truce in mid-May,” Commonwealth Bank of Australia strategists including Kristina Clifton wrote in a note to clients.

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