Asian stocks steady as investors brace for tariff deadline and Fed

By Gregor Stuart Hunter

SINGAPORE (Reuters) -Asian stocks rose modestly on Wednesday, with investors cautious after trade talks between the U.S. and China ended without any substantive agreement and ahead of the Federal Reserve’s policy announcement.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3%, led by gains for Taiwanese stocks, after U.S. stocks ended the previous session with mild losses as traders braced for a slew of corporate earnings.

Australian shares were up 0.7%, while Japan’s Nikkei stock index slid 0.03%, and Hong Kong’s Hang Seng Index skidded 0.4%. The euro edged up from a one-month low, rising 0.2% to $1.1564, 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 a 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. [US/]

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%.

TARIFFS, CORPORATE EARNINGS

The Bank of Japan is expected to hold steady 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 BOJ to resume its rate-hike path.

Ahead of Trump’s deadline to reach a deal to avert imposition of the “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.