Nikkei Soars to Record as Asia Markets React to Trump-Xi Trade Truce

Gerik

Summary:

Japan’s Nikkei 225 reached an all-time high, leading broad gains in Asian markets following a temporary truce between the United States and China...

Asian Equities Rise on Trade Relief, But China Data Dampens Enthusiasm

Markets across Asia opened higher on Friday as investors welcomed a diplomatic breakthrough between the United States and China. The headline development was a tentative truce reached during a high-level meeting between President Donald Trump and President Xi Jinping in South Korea. This agreement, primarily aimed at defusing a heated dispute over rare earth exports, eased immediate concerns about a deepening trade war between the world’s two largest economies.

Japan’s Nikkei 225 rose by 1.21% to close at a record 51,948.26, while the broader Topix gained 0.79%, also setting a new high. South Korea’s Kospi advanced 0.46% following a fresh record the previous day, and the Kosdaq index increased 0.47%. Australia’s S&P/ASX 200 edged up 0.32%. However, gains were uneven across the region, with the Hang Seng Index in Hong Kong dropping 0.72% and China’s Shanghai Composite declining by 0.55%.

Trump-Xi Truce Offers Short-Term Relief, Not Resolution

The de-escalation between Washington and Beijing brought immediate optimism to markets, especially those in Japan and South Korea, which are highly sensitive to regional geopolitical tensions. JPMorgan Asset Management’s strategist Chaoping Zhu noted that both sides are likely keeping key policy levers intact as future bargaining tools, suggesting that this truce is more strategic pause than lasting peace.

Nevertheless, the symbolic thaw in relations helped restore some investor confidence, especially in export-driven economies like Japan’s, which stands to benefit from eased tensions in semiconductor and technology supply chains.

China’s Manufacturing Slump Underscores Economic Fragility

Despite the trade truce, data released by the National Bureau of Statistics painted a bleak picture of China’s manufacturing health. The official manufacturing Purchasing Managers’ Index (PMI) dropped to 49 in October, below the expected 49.6 and remaining under the contraction line for the seventh consecutive month. This is the weakest performance since May and reflects persistent domestic demand weakness and lingering trade disruptions, particularly from the earlier stages of the Trump-era tariffs.

The continued manufacturing contraction raises concerns about China’s growth resilience. The country’s reliance on industrial output for economic stability has become increasingly precarious as the property sector falters and private investment slows.

Corporate Earnings Pressure Broader Market Mood

Investor sentiment was also dampened by negative corporate developments. Panasonic Holdings shares plunged more than 8% after the company cut its full-year operating profit forecast by 13.5%. The downgrade was largely attributed to declining profits in its energy division, which supplies batteries to Tesla and other electric vehicle manufacturers. This revision not only reflects sector-specific weakness but also echoes broader caution among tech and industrial firms amid shifting global supply chain dynamics.

Adding to the cautious tone, U.S. markets closed lower overnight, with all three major indexes retreating. The Nasdaq Composite led the decline with a 1.57% drop to 23,581.14, while the S&P 500 slipped 0.99% to 6,822.34. The Dow Jones Industrial Average shed 109.88 points, or 0.23%, ending at 47,522.12. These losses followed a round of underwhelming earnings reports from Big Tech companies, further reinforcing investor skittishness about equity valuations amid mixed economic signals.

While the Trump-Xi trade truce sparked immediate gains across Asia-Pacific markets, particularly in Japan and South Korea, underlying concerns about China’s manufacturing slowdown and disappointing earnings from key corporates continue to temper the optimism. Investors remain focused on structural data trends and the potential for further policy intervention as the fourth quarter unfolds. Unless China reverses its industrial contraction and corporate profitability stabilizes, the sustainability of the current rally remains in question.

Source: CNBC

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