Asian Markets Hold Firm as Euro Gains on Trump’s EU Tariff Delay

SINGAPORE: Asian stock markets remained stable on Monday, and the euro strengthened after President Donald Trump unexpectedly prolonged his threat to impose 50 per cent tariffs on EU products by over a month, signalling yet another brief break in his unpredictable trade strategy. Trump consented to push back his deadline for trade negotiations to July 9, from the June 1 date he announced on Friday, following European Commission President Ursula von der Leyen's statement that the bloc required additional time to "achieve a favourable agreement." Market sentiment had stabilised following a significant downturn in various assets last month as Trump halted his growth-impeding tariffs and investors showed enthusiasm for new trade agreements after a deal with Britain and a temporary accord with China.

Nevertheless, Trump's recent policy actions served as a reminder to investors of how rapidly conditions can alter, and analysts have noted that investors are reallocating their funds from the U.S. to Europe and Asia while anticipating a potential U.S. recession and an ensuing global slowdown. Commerzbank stated in a note that the remarks from last Friday highlighted the unpredictable and seemingly illogical policies and decision-making of Trump and his administration. On Monday, the broadest index of Asia-Pacific shares outside of Japan from MSCI dropped 0.07 per cent, whereas futures in Europe and Germany pointed to an opening rise of more than 1.5 per cent. Among currencies, the euro rose 0.35 per cent to $1.1404 - its peak since April 29 - while risk-sensitive currencies from Australia and New Zealand increased by 0.37 per cent and 0.45 per cent respectively.

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The dollar index, which gauges the greenback against a range of currencies, reached its lowest point since April 22, with analysts stating that the "Sell America" theme remains prevalent. "It continues to be primarily a 'sell dollar narrative,'" remarked Christopher Wong, currency strategist at OCBC. "The uncertainty of Trump's tariffs policy and the diminishing U.S. exceptionalism may still weaken sentiment and confidence in the medium term." Trading volumes on Monday are anticipated to be light since markets in the United States and the UK are shut down for public holidays. In Japan, the Nikkei increased, as Nippon Steel climbed 2.3 per cent following Trump's Friday endorsement of the company's $14.9 billion offer for U.S. Steel.

The spotlight will be on super-long Japanese bonds as inflation figures are anticipated later this week, with investors assessing the Bank of Japan's monetary policy direction. Last week, yields on the tenors reached unprecedented heights. Rising debt levels in advanced economies have once again garnered attention after Moody's downgraded the United States' credit rating and following unsatisfactory debt auctions in both the U.S. and Japan last week. China's blue-chip index decreased by 0.7 per cent on Monday, whereas Hong Kong's Hang Seng Index <.HSI> dropped 1 per cent. China-listed Apple suppliers suffered a setback after Trump announced a potential 25% tax on all imported iPhones purchased by U.S. consumers on Friday.