Most Markets Rise as China-US Tariff Truce Extended, Inflation in Focus

Asian markets mostly rose on Tuesday, as investors welcomed the extension of a tariff truce between China and the United States, while remaining cautious ahead of key US inflation data scheduled for later in the day.

China-US Tariff Truce Extended

US President Donald Trump announced a widely anticipated trade decision that halts the reimposition of steep tariffs. This extension permits officials from Washington and Beijing to continue negotiations into November, seeking to resolve their ongoing trade dispute.

In an executive order, the White House reaffirmed its stance on the “large and persistent annual US goods trade deficits,” describing them as “an unusual and extraordinary threat to the national security and economy of the United States.”

Despite the truce, analysts remain wary. William Yang, from the International Crisis Group, commented:

“Beijing will be happy to keep the US-China negotiation going, but it is unlikely to make concessions.”

Market Focus Shifts to Inflation Data

With tariffs settled for now and trade discussions continuing with other partners, markets are turning their attention to the upcoming US consumer price index (CPI) report, which could heavily influence the Federal Reserve’s interest rate decisions.

Recent economic indicators suggest a slowing US economy, with the labour market showing signs of weakening over the past three months. Although the CPI is expected to slightly exceed June’s figure, analysts caution investors to tread carefully.

Stephen Innes of SPI Asset Management remarked:

“CPI is the storm front straight ahead. A soft number, and the market exhales. A hot number, and the stagflation whisper becomes the only language anyone speaks.”

Tariffs and Inflation Impact

Concerns persist that tariffs could exacerbate inflation. However, Ray Attrill of National Australia Bank noted:

“The larger tariff impacts… probably will not be felt until August/September, with firms now only gaining some clarity on the degree of reciprocal tariffs.”

He added that companies have mostly awaited clarity on final tariff rates before adjusting prices, as reflected in recent profit reports.

Other Economic Data and Outlook

In addition to the CPI, wholesale prices and retail sales data are due this week. The Fed’s preferred inflation gauge will be released at the end of the month, with officials expected to decide on rate changes in mid-September. Market forecasts predict a rate reduction at that meeting, with possibly one more before the year’s end.

Market Movements in Early Trade

Following an extended weekend, Asian markets saw mixed results:

Currency and Commodities Snapshot (Approx. 0200 GMT)

Western Market Close