Japanese and South Korean equities rose in early Tuesday trading on cautious hopes that the countries can reach trade deals ahead of Donald Trump’s newly-extended tariff deadline.
The yen was fractionally stronger after dropping about 1% overnight. The won gained.
Japan’s blue-chip Nikkei 225 rose as much as 0.5% as of 9:30 a.m. in Tokyo, while Korea’s Kospi gained as much as 1.5% after Trump sent letters to his counterparts in Tokyo and Seoul threatening levies of 25% beginning Aug 1.
While American depositary receipts of Japanese and Korean carmakers traded in the US had declined overnight, automakers made small gains in early local trading on Tuesday. Tech-related names like Furukawa Electric Co and Rohm Co were among the Nikkei’s biggest gainers. Japan’s broader Topix Index fluctuated between gains and losses.
“The 25% level is definitely high, but I think there’s still a sense of optimism” that Tokyo can clinch a deal with Washington now that the deadline has been extended from the original July 9, said Yusuke Sakai, a senior trader at T&D Asset Management.
The weaker yen is providing support for Japanese exporters’ shares Tuesday, but “there’s a lingering sense of unease that Trump seems to be stricter toward Japan than some other trading partners, like Europe,” which is likely to limit gains, Sakai added.
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Despite the turmoil that Trump’s stance on trade has brought to markets, Japanese and Korean shares have rebounded from the lows set in April in the wake of the president’s “Liberation Day” tariff onslaught. The recovery reflects bets that Japan, Korea and other trading partners will be able to reach deals with the US that don’t derail economic growth.
“It’ll be a headline-driven trade over the next two weeks” for stocks, said Hebe Chen, a market analyst at Vantage Markets in Melbourne. “If talks show signs of progress, the rebound could be just as sharp” as any caution-driven selloffs.
