Asian stocks opened higher as investors remained cautious ahead of a key US inflation report expected to shape the Federal Reserve’s interest-rate path.
The MSCI Asia Pacific Index rose 0.4%, helped by a 2% rise in the Nikkei-225 index. The Japanese gauge, which was closed for a holiday on Monday, traded above its previous record high closing level as concerns over tariff levels eased and company bolstered sentiment. The dollar edged lower while Treasuries were little changed at the open.
US stocks lost steam on Monday after climbing to the brink of all-time highs. Chinese shares will be in focus after President Donald Trump extended a pause of tariffs on Chinese goods for another 90 days into early November.
With the earnings season almost done, investors are turning to economic data for clues on whether the Fed will be able cut rates in September. Data due Tuesday is forecast to show US consumers saw a slight pickup in inflation as retailers gradually raised prices on a variety of items subject to higher import duties.
“The market’s reaction to any surprises in the numbers could be exaggerated — especially if a significantly hotter-than-expected CPI print leads traders to believe the Fed may not cut rates at its next meeting,” said Chris Larkin at E*Trade from Morgan Stanley.
The core consumer price index in the US, regarded as a measure of underlying inflation because it strips out volatile food and energy costs, will show a 0.3% increase for July, according to the median projection in a Bloomberg survey of economists.“There is no doubt about it, CPI will not be good,” said Andrew Brenner at NatAlliance Securities. “The bigger question is ‘does it matter?’ We think not.”Money markets show traders have priced in more than two rate reductions by December, with about a 90% probability of a quarter-point Fed cut next month. The latest jobs report also pointed to a sharp cooling in the labor market over the last few months. Policymakers left rates unchanged at the end of July.On tariffs, China confirmed it will suspend or cancel non-tariff countermeasures against the US in accordance with the agreements reached in the Geneva talks, according to a statement from the Chinese commerce ministry.
“For now, the markets are pleased that progress is being made to extend the August 12 deadline, but this is by no means certain and no deal has been signed,” said Seb Mullins, Schroders’ head of multi-asset and fixed income in Australia. “The China trade deal is the most likely to flare up again, which will have the greatest impact on total US tariffs.”
Meanwhile, the Fed’s two vice chairs, Michelle Bowman and Philip Jefferson, and Dallas Fed President Lorie Logan are under consideration to serve as chair of the central bank when the position opens next year, according to two administration officials. Treasury Secretary Scott Bessent will interview additional candidates in the coming weeks, said the officials.
Trump named EJ Antoni, chief economist of the conservative Heritage Foundation, to lead the Bureau of Labor Statistics after firing the former head of the agency earlier this month.
Gold held a loss after Trump said imports of bullion won’t be subject to US tariffs, although traders were still waiting for formal clarification over the policy following a federal ruling last week that sowed chaos and confusion across the market.
Elsewhere, Australia’s central bank is poised to deliver its third interest-rate cut this year on Tuesday as inflationary pressures ebb, while Governor Michele Bullock is expected to stick with her cautious stance on the monetary policy outlook.