Asian stock markets follow US indices higher and trade near record highs
Nikkei 225 futures traded in Chicago are hovering just below their record highs, indicating the cash index could hit that milestone this week.
Despite the rally, the Nikkei’s price-to-earnings (P/E) ratio stands at 19 – lower than the S&P 500’s 22 and far below the Nasdaq’s near-33, the latter reflecting a premium for artificial intelligence (AI)-related stocks.
In that context, some sources say that Nvidia and Advanced Micro Devices (AMD) have apparently agreed to give the US government 15% of revenue from AI chip sales to China in exchange for export licenses. So far, the US government hasn’t commented on this.
US inflation will be closely watched this week
Not just for stocks but for the US dollar and bonds, the main focus will be Tuesday’s US consumer price data. Tariffs could push core inflation up by 0.3%, bringing the annual pace to 3.0% – further from the Federal Reserve’s (Fed) 2% goal. Estimates range between 2.9% and 3.2%, hinting at upside risk that could challenge current around 90% expectations for a September rate cut. Still, analysts suggest it would take a notably high figure to shift the outlook, as recent payroll declines are now dominating rate-cut expectations.
US politics’ potential Fed policy impact
Political developments could also influence the Fed’s path. Trump’s nominee for Fed governor, Stephen Miran, may not be confirmed in time to vote in September, while the shortlist for the next chair has expanded to roughly ten candidates.
To date lower borrowing cost prospects have supported equities alongside strong corporate earnings – BofA notes 73% of companies have beaten earnings expectations (versus a 59% historical average) and 78% have topped revenue forecasts.
Asian markets amid looming US-China trade deal deadline
Tuesday is also the supposed deadline for a US-China trade deal. While an extension is widely assumed, neither side has made a public statement.
On Monday MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3%, while South Korea’s Kospi was flat after a 2.9% rally last week. China’s blue chip CSI300 rose 0.5% after July data showed consumer prices unchanged from a year earlier – better than forecasts for a 0.1% drop – while producer prices continued to fall as the country’s massive manufacturing sector exported deflation to the rest of the world.
Commodities & geopolitics
Oil prices have softened amid speculation that talks between US President Trump and Russian President Putin on Friday 15 August could yield progress on Ukraine – though expectations remain low, especially as the White House has floated a land-swap idea Ukraine would reject.
Gold fell by 1.2%, to below $3,360.00 per troy ounce, on Monday as easing geopolitical tensions reduced safe-haven demand. Losses may be capped, however, by ongoing trade uncertainties and growing bets on Fed rate cuts this year.
Meanwhile, markets are awaiting clarity on US tariffs for gold bars after a government ruling last week made them subject to duties.