Asian equities edged lower on Wednesday as investors remained focused on the prospects of US interest rate cuts and the July 9 deadline set by President Donald Trump for new trade tariffs. Meanwhile, oil prices held steady ahead of the upcoming OPEC+ meeting.
According to Reuters, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.23% in early trade, retreating from recent highs. Japan’s Nikkei 225 dropped 0.78%, dragged down by technology stocks. Markets in South Korea and Taiwan also weakened, tracking the recent sell-off in US tech shares.
Trump, on Tuesday, ruled out any extension of the July 9 deadline for trade talks, raising concerns over negotiations with Japan while remaining optimistic about reaching a deal with India. Additionally, his push for a $3.3 trillion tax-and-spending bill has raised fiscal concerns among investors.
Aninda Mitra of BNY Investment Institute told Reuters that while the immediate market impact is priced in, the uncertainty could keep term premia elevated, warning that the bill signals a path of continued fiscal deterioration.
The US dollar index hovered near multi-year lows, last seen in March 2022. The euro traded at $1.1793, near a 3.5-year high, while the yen stayed around 143.52 per dollar. Carol Kong of Commonwealth Bank of Australia warned that any weak US economic data could trigger more dollar selling and increase expectations of Federal Reserve rate cuts.
Fed Chair Jerome Powell reiterated a wait-and-watch approach on rate policy, resisting political pressure. Markets are now pricing in 64 basis points of rate cuts for the remainder of 2025, with a 21% chance of a July cut.
Regional stocks, as per Bloomberg, fell 0.2%, with Japanese equities down nearly 1% after Trump threatened higher tariffs on Japan and criticized Tokyo’s stance on US rice exports. Analysts suggested some overreaction to Trump’s trade rhetoric. Phillip Wool of Rayliant Global Advisors termed it part political theater.
In commodities, oil prices traded in a narrow range. Brent crude edged up 1 cent to $67.12 per barrel, while US WTI slipped 5 cents to $65.40, ahead of the July 6 OPEC+ meeting. The group is expected to announce another production hike, potentially around 411,000 barrels per day for August.
Phil Flynn of Price Futures Group said oil prices remain range-bound amid reduced geopolitical risk and speculation over OPEC’s production decision. Recent tensions between Iran and Israel have eased, but market watchers remain alert for any OPEC+ surprises or US economic data triggers.
US crude inventories rose by 680,000 barrels last week, according to API data, with official EIA numbers expected later on Wednesday.
With the US June payroll report due Thursday and trade tensions still looming, investor sentiment remains cautious towards global growth.
