Asian stock markets edged lower on Tuesday after hitting their highest levels in nearly four years, as investors remained cautious ahead of a wave of corporate earnings and monitored ongoing U.S. tariff negotiations with key trading partners.
The muted sentiment is expected to carry over into European markets, where attention will shift to earnings reports from major companies such as SAP and UniCredit. Ahead of the earnings reports, the EUROSTOXX 50 was down 0.30 percent, while DAX futures fell 0.38 percent. However, FTSE 100 futures were up 0.05 percent.
Japanese markets reopen after weekend election
In the Asian stock market, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.55 percent after hitting its highest level since October 2021 in early Asian hours. Japan’s Nikkei dipped 0.27 percent, while South Korea’s KOSPI plunged 1.48 percent.
In China, the CSI300 INDEX rose 0.45 percent, while Hong Kong’s Hang Seng gained 0.19 percent and Australia’s AXJO stock index was up 0.10 percent. Taiwan’s Topix index was down 0.061 percent today, while India’s NIFTY 50 fell 0.14 percent.
Japanese markets reopened on Tuesday after a holiday on Monday, reacting to the weekend’s upper house election results in which the ruling coalition suffered a setback. Despite the defeat, Prime Minister Shigeru Ishiba pledged to stay in office.
Notably, the S&P 500 and the Nasdaq recorded record-high closes on Monday and were trading higher on Tuesday.
The yen climbed 1 percent on Monday, recovering some of its recent losses, though it later eased slightly to 147.73 per dollar.
Economists noted that the weakening of Prime Minister Shigeru Ishiba’s political position could pave the way for increased fiscal spending—an outlook that bodes poorly for Japanese assets, including the yen. If worries about Japan’s fiscal trajectory grow, both long-term government bond yields and the yen could decline further.
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Tariff negotiations in focus
The stock market’s attention remains fixed on ongoing tariff negotiations as the August 1 deadline approaches, with the European Union now considering a wider range of potential countermeasures against the United States amid dwindling hopes for a favorable agreement with Washington. Analysts noted that the most critical trade deals for the global economic outlook are those involving the EU and Japan.
The euro held steady at $1.1689 on Tuesday, following a 0.5 percent gain in the previous session, though it remained below the near four-year high reached earlier this month. The currency has climbed 13 percent so far this year, as investors increasingly shifted away from U.S. assets amid tariff-related uncertainty.
Meanwhile, the U.S. dollar index, which tracks the greenback against six major currencies, rose 0.09 percent to 97.94.
Investors are closely watching earnings reports this week from major Wall Street players Alphabet and Tesla, along with European giants LVMH and Roche, as ongoing tariff uncertainty continues to cloud the market outlook.
Adding to the unease are concerns over the Federal Reserve’s independence, with speculation rising in recent weeks about whether U.S. President Donald Trump might move to dismiss Fed Chair Jerome Powell, keeping markets on edge.
