Mixed Results in Asian Stock Markets as Traders Anticipate Release of U.S. Inflation Figures
Stock Markets Show Mixed Performance Across Asia
Asian stock markets displayed a mixed performance on Tuesday, with Japanese markets outperforming their counterparts. While the U.S. and China confirmed a 90-day extension of their trade truce, keeping tariffs steady until November, the broader picture remained uncertain.
Japanese Markets
The Nikkei 225 Index jumped to a record high, as traders returned to their desks after a holiday, with the broader Topix Index also showing gains. Business activity in Japan’s private sector expanded at the fastest pace in six months as of August 2025, driven mainly by growth in services and new orders domestically. However, manufacturing new orders continue to contract, and optimism among manufacturers is declining, reflecting uncertainty about the sustainability of the goods-producing sector's recovery.
Japanese stocks rallied as concerns over tariff levels eased, boosting optimism over trade with the United States. Some sectors aligned with domestic demand, such as supermarkets, hotels, construction, retail, and especially financial institutions benefiting from rising interest rates, are performing well. Inflation and corporate governance reforms are causing a divergence between the best growth-focused companies and others, with those holding strong pricing power and making sensible investments poised to outperform.
However, underlying inflationary pressures from import prices remain, and the Bank of Japan is expected to continue monetary policy normalization with rising interest rates to address persistent inflation and a tight labor market, supporting improved domestic demand. Japanese chemical manufacturers anticipated significant profit declines due to US tariffs but have since reduced such estimates, reflecting adjustments in operations and balance sheets.
Other Asian Markets
Elsewhere in Asia, the Dow dropped half a percent, and the tech-heavy Nasdaq Composites and the S&P 500 both eased around 0.3 percent. U.S. stocks ended lower overnight. The benchmark S&P/ASX 200 Index rose 0.4 percent to 8,880.80, while the Kospi dropped 0.5 percent to 3,189.91.
In South Korea, Seoul stocks ended lower for a third straight session, with energy, shipbuilding, and entertainment shares pacing the declines. Hong Kong's Hang Seng Index rose ahead of first-half earnings results from prominent index constituents. Chinese chipmakers' shares surged due to signs that China is seeking to strengthen its domestic semiconductor industry.
Beijing has urged domestic firms to avoid using Nvidia's H20 processors in sensitive projects, potentially boosting demand for local alternatives. Gold edged up slightly, the dollar held gains, and oil prices were modestly higher due to U.S. President Trump's comments about his meeting with Russian leader Vladimir Putin.
Despite the mixed performance, the future outlook depends on sustaining the manufacturing recovery and favorable trade negotiations with the U.S. and its trade partners. A cautious undertone prevailed in other regional markets ahead of key U.S. inflation data.
- Investors are closely monitoring the trade negotiations between the US and its trade partners, as the future outlook of Asian markets depends on their success and the sustained recovery of the manufacturing sector.
- The Japanese financial sector has been performing well, with sectors aligned with domestic demand such as supermarkets, hotels, and retail, benefiting from rising interest rates and corporate governance reforms. However, underlying inflationary pressures remain a concern, with the Bank of Japan expected to continue monetary policy normalization.
