Asian Stocks Start Cautious Amid US-EU Tensions
Asian stocks struggled for direction as traders navigated rising tensions between the US and the European Union and looming central bank monetary policy decisions.
Australian shares slumped while Japan swung between gains and losses. Futures in Hong Kong also pointed to early losses. US Treasury bonds and the dollar were little changed.
The lukewarm start to the week came as investors monitored rising tensions between the US and Europe after President Donald Trump’s tariff plans sparked threats of retaliation. Vice President JD Vance lashed out at long-time European allies at a security conference over the weekend while plans to negotiate an end to the war in Ukraine have left the bloc on the sidelines.
“The lack of visibility given what appears to be an unpredictable US administration means that short-term market participants are not getting much conviction,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “The bilateral talks between the US and Russia over Ukraine are a bit like the (1956) Suez Crisis where US interests were very different to those of the UK and France.”
Investors’ focus will likely remain on near-term macroeconomic data with a raft of policy decisions from Wellington to Jakarta due this week. The Reserve Bank of Australia is expected to begin its long-awaited interest rate-cutting cycle on Tuesday, while New Zealand’s central bank is likely to resume its rapid easing to support a sluggish economy on Wednesday.
“We expect the RBA to finally start its easing cycle, as inflation has eased significantly,” Societe Generale SA economists including Wei Yao wrote in a note.
Investors will also be watching Chinese stocks after a gauge of U.S.-listed mainland stocks rose 2.3% on Friday amid euphoria over artificial intelligence companies. A potential meeting this week between President Xi Jinping and e-commerce icon Jack Ma could be the next catalyst to extend the rally in Chinese stocks. Meanwhile, Michael Burry has been paring back some of his investments in Chinese tech stocks just before DeepSeek’s breakthrough in artificial intelligence reignited a $1.3 trillion rally in the country’s stocks. Elsewhere in Asia, Westpac Banking Corp. shares fell as much as 6% after profit and margins slumped. Japan’s economy expanded for a third straight quarter as companies ramped up investment and net exports improved. Elsewhere this week, inflation readings in Japan, the U.K. and Canada are due, as well as jobs data in Australia.
Chinese banks are set to keep their benchmark lending rates steady after credit expansion accelerated much more than expected in January from a year ago, though overall credit growth remained at historically weak levels.
In commodities, oil extended its decline into a fourth day. It fell on Friday as concerns about a supply glut and Trump’s demand-damaging tariffs overshadowed U.S. threats to Iran’s crude exports. Gold was steady.
Source: Bloomberg
