Most Asian stocks rose on Tuesday, following the gains on Wall Street amidst increasing expectations of a September interest rate cut. The positive cues from a strong finish on Wall Street were further boosted by dovish-leaning comments from Federal Reserve Chair Jerome Powell regarding easing inflation. This led to regional markets tracking these gains and moving upwards. However, Chinese markets did not fare as well due to concerns over a cooling economy and headwinds from U.S. politics.
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes remained flat to low while Hong Kong’s Hang Seng index slid 1.5%. Speculation over a potential second term for Donald Trump negatively impacted Chinese stocks as the former president had a history of imposing steep tariffs on China during his term, sparking a trade war between Washington and Beijing. The fear of renewed tensions with the West, particularly after the European Union imposed import tariffs, added to the pressure on Chinese markets. Additionally, underwhelming second-quarter GDP data exacerbated the situation for Chinese stocks.
Despite the underperformance of Chinese markets, broader Asian markets mostly advanced on Tuesday. South Korea’s KOSPI added 0.1% while Japan’s Nikkei 225 and TOPIX were the best performers of the day, rising 0.5% and 0.8% respectively after a holiday on Monday. The futures for India’s Nifty 50 index also pointed to a positive open, reflecting optimism over the Indian economy. However, Australia’s ASX 200 fell 0.2% from record highs, primarily due to losses in heavyweight miner Rio Tinto Ltd.
Rio Tinto fell 2.3% after its second-quarter iron ore shipments missed estimates, attributed to disruptions from a train derailment. Despite the rise in shipments amidst slowing demand in China, the uncertainty surrounding the Chinese economy clouded the firm’s outlook. Weakness in China has broader implications for other Australian commodity stocks as China is the country’s largest export destination. Rio’s peer, BHP Group Ltd, also experienced a decline of 1.7%.
Overall, while most Asian markets experienced gains driven by optimism from Wall Street, Chinese markets faced challenges due to a combination of economic concerns and political tensions. The performance of Australian stocks, particularly in the mining sector, was also impacted by developments in China. The situation highlights the interconnectedness of global markets and the importance of monitoring multiple factors when making investment decisions in the region.