Asian stocks mixed as US-China trade optimism lifts sentiment

Synopsis

Japanese stocks are expected to decline as markets reopen, despite global equity gains fueled by renewed US-China trade optimism. This comes as the nation's ruling coalition collapses, creating political uncertainty. Meanwhile, US markets saw a strong rebound, with investors buying the dip amid a resilient economy.

Japanese stocks look set to slide when markets reopen after a three-day weekend, even as renewed optimism over US-China trade talks lifts sentiment across global equities.

Equity-index futures for Japan dropped more than 1% as traders react to the collapse of the nation’s ruling coalition and the US-China spat. Contracts for Hong Kong were flat while Australian shares opened little changed. An index of US-listed Chinese stocks rallied 3.2%, with Alibaba Group Holding Ltd. and Baidu Inc. among the winners. Silver hit a record high.

The S&P 500 closed 1.6% higher Monday, its best showing since May, clawing back some of Friday’s slump when fresh tensions between Washington and Beijing spooked investors. The Nasdaq 100 rose 2.2% and a key gauge of chipmakers surged nearly 5%. Broadcom Inc. soared about 10% as OpenAI agreed to buy its custom chips and networking equipment. In Asia, Samsung Electronics Co. rode the AI boom to post its biggest profit since 2022.

The gains on Wall Street signaled investors’ willingness to buy the dip as a resilient economy and Federal Reserve easing overshadowed concerns about a bubble in AI stocks. That optimism faces an early test this week, with a wave of earnings from major US banks marking the unofficial start of third-quarter results on Tuesday.

“Investors remain eager for exposure, and if this recovery holds, it will reinforce the idea that retail investors can’t be easily shaken and another reminder that buying the dip continues to work,” said Mark Hackett at Nationwide.

In other corners of the market, Treasury futures barely budged Monday, with the US bond market closed for Columbus Day. The dollar rose 0.2%. The yen was steady early Tuesday after weakening against the greenback on Monday. Gold was little changed after hitting another new high on Monday, while West Texas Intermediate crude extended gains.

Cryptocurrencies stabilized, recovering from the selloff on Friday. While the crash was brief and prices have since partially recovered, critics point to underlying issues in the crypto market’s structure that make it prone to violent selloffs

In Asia, data set for release includes gross domestic product and a monetary policy statement from Singapore, Reserve Bank of Australia meeting minutes, and wholesale prices for India.

Meanwhile, US Treasury Secretary Scott Bessent said he still expects Presidents Donald Trump and Xi Jinping will meet.

However, he warned that all options are open for retaliating against China’s move to tighten exports of rare earths. China’s Ministry of Commerce had urged further negotiations to resolve outstanding issues.

The focus in Asia will be on Japan, where markets are poised for a turbulent open following the collapse of the nation’s ruling coalition.

Japanese government bonds look vulnerable to more bearish sentiment this week, with a fluid political backdrop complicating the outlook for fiscal policy.

Equities investors who drove the Nikkei 225 and Topix stock gauges to fresh record highs last week are now assessing the fallout from the ruling Liberal Democratic Party’s loss of its coalition partner, Komeito, less than a week after Sanae Takaichi took over as leader of the LDP.

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