Asian Markets Fall on Weak China Data, Strong Yen; Global Tariffs and BOJ Outlook Stir Investor Caution

Asian stocks declined on Thursday, weighed down by disappointing Chinese economic data and a sharp drop in copper prices. The MSCI Asia-Pacific index (excluding Japan) fell 0.7%, though it remained on track for a fourth consecutive monthly gain. Hong Kong and mainland Chinese markets led the regional decline following underwhelming purchasing managers’ index (PMI) readings for July. At the same time, U.S. stock futures climbed, boosted by stronger-than-expected earnings from tech giants Meta and Microsoft.

The Japanese yen strengthened by 0.4% to 148.62 per U.S. dollar after the Bank of Japan held interest rates steady at 0.5% and raised its inflation outlook. While Japanese equities showed limited reaction, the policy move raised expectations of a possible interest rate hike later in the year—potentially as early as October. Analysts interpreted the BOJ’s optimistic stance as a sign of gradual monetary tightening ahead, while shorter-dated Japanese bonds pared losses.

Markets also digested the effects of a sweeping new wave of U.S. trade tariffs. President Donald Trump announced a 15% tariff on South Korean imports, alongside a deal for South Korea to invest $350 billion in the U.S. and purchase $100 billion in energy products. Meanwhile, Malaysia and Thailand await tariff announcements, and India faces a 25% tariff on its goods. These trade developments sparked currency volatility and cast a cloud over emerging markets and commodity prices.

Copper futures plummeted 19.4% after Trump revealed a 50% tariff on copper pipes and wiring—less than expected, but still significant enough to rattle markets. Meanwhile, the dollar index hovered near a two-month high, supported by the Federal Reserve’s decision to hold rates steady for the fifth time. Despite a better-than-expected Q2 GDP growth figure, Fed Chair Jerome Powell’s post-meeting remarks undermined hopes for a September rate cut, fueling investor uncertainty.

The global economic outlook remains clouded by protectionist U.S. trade policies and uncertain monetary paths in key economies. While some markets benefited from corporate earnings optimism—such as the Nasdaq rising on tech results—others, particularly in Asia, reflected concern over sluggish Chinese demand and growing geopolitical trade tensions. Oil prices held steady amid this economic flux, and investors are bracing for additional signals from central banks and trade partners in the days ahead.

Source: Reuters