Asian Shares End Mostly Higher As Trump's New Tariffs Go Into Effect

Asian stocks largely advanced on Thursday, driven by renewed expectations for a Fed rate cut, optimism for a Sino-U.S. trade resolution, and better-than-expected July export data from China, which saw a 7.2% year-over-year increase. Major indices across China, Hong Kong, Japan, and South Korea posted gains, with the latter benefiting from its Most Favored Nation status and Samsung's new Apple contract, while the dollar weakened and gold and oil prices rose. However, the positive sentiment was tempered by the implementation of new U.S. tariffs, notably impacting specific sectors like chipmakers, and leading to slight profit-taking in Australian markets after record highs.

Analysis

Asian equity markets broadly advanced, propelled by a trio of positive catalysts: renewed expectations for a Federal Reserve rate cut following weak U.S. labor data, which pushed the dollar index below the 98 mark; optimism surrounding a potential Sino-U.S. trade deal; and stronger-than-expected Chinese economic figures. China's July exports defied forecasts by climbing 7.2% year-over-year in dollar terms, with imports also unexpectedly growing 4.1%. This data supported Chinese indices and fueled a risk-on sentiment that also lifted oil prices by approximately 1% on an unexpected inventory drawdown and pushed gold higher. Regional performance, however, was not uniform. The South Korean Kospi was a notable outperformer, jumping 0.92% on news that it would receive Most Favored Nation status and a 2.5% rally in Samsung Electronics after securing a contract to manufacture Apple's next-generation processors. In Japan, the Nikkei gained 0.65%, led by financials like Mitsubishi UFJ and Mizuho, but the semiconductor sector faced significant headwinds; Tokyo Electron tumbled 2.5% on concerns over a threatened 100% U.S. tariff on certain chip imports. In contrast, the Australian S&P/ASX 200 edged down 0.14% as investors engaged in profit-taking after two consecutive record-high sessions.

Key Decisions for Investors

• Investors should consider the divergent impact of U.S. trade policy, favoring firms with positive company-specific catalysts like Samsung's Apple contract or secured trade advantages, while remaining cautious on sectors directly in the crosshairs of new tariffs, such as semiconductor equipment.
• The market's advance on Fed rate cut speculation suggests maintaining exposure to risk assets and commodities, but the profit-taking in Australia indicates a need to monitor for signs of exhaustion in markets that have run up significantly.
• Re-evaluate exposure to China-sensitive assets, as the surprisingly strong 7.2% export growth provides a bullish counterpoint to the tariff narrative and could signal underlying economic resilience.