Source: Sharecast
Patrick Munnelly, market strategy partner at TickMill, said that coming out of the long weekend in the US and UK, international trade and fiscal policy remained the key macroeconomic themes influencing financial markets.
“On trade, the main development is that President Trump has agreed to delay the implementation of 50% tariffs on the EU from 1 June to 9 July, providing additional time for negotiated agreements,” he said.
“In response, the EU has committed to ‘fast track’ trade discussions.
“This news supported gains in US equity futures yesterday but left the dollar under pressure.”
Meanwhile, Munnelly noted that the yen initially strengthened following hawkish remarks by Bank of Japan Kazuo Ueda, who signalled a willingness to “adjust the degree of monetary easing as necessary” while highlighting risks of rising underlying inflation driven by food prices.
“However, the yen’s gains were reversed as Japan’s Ministry of Finance engaged market participants in consultations about bond issuance splits, hinting at potential reductions in long-dated issuance due to challenges digesting recent supply.
“This dynamic also contributed to falling yields in both Japanese Government Bonds (JGBs) and US Treasuries.
“A parallel fiscal theme emerged in the UK, with a Financial Times article titled ‘UK turns to shorter-term borrowing as fiscal pressure mounts’.
Markets mixed across the region amid trade concerns
In Japan, the Nikkei 225 rose 0.51% to 37,724.11, supported by strong gains in industrial and electronics firms.
Kawasaki Heavy Industries jumped 4.61%, TDK Corporation climbed 3.12%, and Furukawa Electric advanced 3.03%.
The broader Topix index also added 0.64% to close at 2,769.49.
Mainland Chinese stocks retreated, with the Shanghai Composite down 0.18% at 3,340.69 and the Shenzhen Component falling 0.61% to 10,029.11.
Leading the losses in Shanghai were Anhui Yingliu Electromechanical, which dropped 6.64%, Silvery Dragon Prestressed Materials down 6.51%, and Guangdong Tianan New Material off 6.09%.
Hong Kong’s Hang Seng Index gained 0.43% to 23,381.99, bolstered by healthcare stocks.
CSPC Pharmaceutical Group surged 5.83%, Sino Biopharmaceutical rose 4.68%, and China Resources Mixc Lifestyle added 4.03%.
South Korea’s Kospi 100 slipped 0.3% to 2,624.08, dragged lower by key exporters.
EcoPro Materials lost 4.42%, Korea Zinc dropped 4.25%, and LG Electronics declined 3.63%.
Australia’s S&P/ASX 200 rose 0.56% to 8,407.60.
Brambles gained 2.98%, Elders climbed 2.6%, and Corporate Travel Management rose 2.53%.
In New Zealand, the S&P/NZX 50 advanced 0.28% to 12,582.33, led by Pacific Edge up 7.41%, Eroad up 6.54%, and Freightways up 3.3%.
In currency markets, the dollar strengthened across the region, rising 0.62% on the yen to trade at JPY 143.74, while it gained 0.49% against the Aussie to AUD 1.5494, and climbed 0.55% on the Kiwi, changing hands at NZD 1.6760.
Oil prices were little changed, with Brent crude futures last up 0.02% on ICE to $64.75 per barrel, while the NYMEX quote for West Texas Intermediate dipped 0.02% to $61.52.
Yields on super-long JGBs decline amid issue speculation
In economic news, yields on Japan’s super-long government bonds declined on Tuesday amid speculation that the finance ministry may scale back issuance.
According to Reuters, officials were considering adjustments to the country’s bond issuance program for the current fiscal year, which could include cuts to the supply of longer-dated securities.
In response, the yield on 30-year Japanese government bonds fell six basis points to 2.859%, the lowest since 14 May according to CNBC, while 20-year yields dropped seven basis points to 2.351%.
In contrast, shorter-term bond yields edged higher, with two- and five-year yields rising to 0.732% and 1.002%, respectively.
Separately, Japan lost its position as the world’s top creditor nation for the first time in 34 years, overtaken by Germany.
Data from Japan’s Ministry of Finance showed that the country’s net external assets rose 12.9% in 2024 to JPY 533.05trn, but remained below Germany’s €3.5trn.
China ranked third with $3.3trn in net financial assets.
Analysts attributed Japan’s relative decline to rising domestic interest rates and a shift away from ultra-loose monetary policy, which reduced incentives for outbound investment and tempered the growth of foreign asset holdings.
Reporting by Josh White for Sharecast.com.