Asian stock markets saw little movement on Wednesday, as trade talks between the United States and China concluded without significant breakthroughs. Early advances in MSCI's Asia-Pacific index outside Japan faded, and it was flat by the afternoon. Japan's Nikkei index dropped 0.1%, and Australia's ASX 200 index added 0.7%, while Hong Kong's Hang Seng index dropped by 1.3%.
European markets started on a cautious note. Futures for the region gained 0.15% in early trade, and the German DAX futures added 0.31%. The FTSE futures in Britain showed no major change. In currency markets, the euro edged up 0.1% to $1.1555, bouncing back from a one-month low. The surge followed a positive market reaction to a new EU trade agreement with the USA.
Investors Eye the U.S. Federal Reserve
Now all eyes are on the U.S. Federal Reserve's policy decision later on Wednesday. For the time being, experts anticipate, the Fed is likely to keep interest rates steady. Yet some officials could advocate for a rate cut if tariffs hurt inflation to worse-than-expected levels.
"The U.S. job market is strong, so most Fed members want to wait and see how tariffs are impacting prices," said Tom Kenny, an economist at ANZ in Sydney. He thinks the Fed could lower rates at its next meeting in September if inflation pressures continue to rise.
U.S. government bonds rose ahead of the Fed's decision. That forced the 10-year Treasury yield down to 4.328%, the lowest since July 3. The two-year yield stayed around 3.873%—an indication that rates might not move for now.
Trade Tensions Remain Unresolved
The latest round of trade talks between the United States and China yielded no results, although both sides agreed to discuss extending their 90-day tariff truce. There is no decision on whether to extend the truce, which expires on Aug. 12, or let tariffs increase significantly; President Trump has not yet made a decision.
India is also sparring for a possible U.S. tariff hike of up to 25% on certain exports, as it holds back on making new trade offers. In another development, three prime South Korean ministers held talks with the U.S. Commerce Secretary in one last bid to strike a deal. The Bank of Japan is scheduled to hold its policy meeting on Thursday and is expected to maintain its current stance, although investors will look closely at any hints about future rate hikes.
Earnings Update and Oil Prices
The price of oil rose slightly due to concerns about supply. Brent crude rose 14 cents, or 0.2%, to $72.40 a barrel. This came after President Trump gave Russia a shorter deadline to act on ending the Ukraine war, raising fears of supply disruptions.
Corporate earnings were mixed. UBS reported profits above expectations, though HSBC's results undershot amid widening losses in China. The German brand Adidas warned that U.S. tariffs could drag down its profits in the next few quarters.
Markets in the U.S. ended lower on Tuesday. The Dow Jones Industrial Average slipped by less than 0.5%. The S&P 500 and Nasdaq were also down, falling roughly a third of a % apiece. Now investors are awaiting important earnings from tech giants Microsoft and Meta on Wednesday, which are likely to set the tone for the rest of the week in the market.
