Hong Kong: Asian markets saw mixed performance on Wednesday as investors grappled with the implications of a new US trade deal, rising US inflation data, and ongoing tariff threats from Washington. The conflicting signals left traders cautious, leading to varied movements across equity markets.

Trade Deals, Tariffs, and Inflation Concerns

US President Donald Trump announced a trade deal with Indonesia, which will see a 19 percent tariff on Indonesian goods, lower than the previously threatened 32 percent, while US shipments will remain untaxed. This marks Trump's third trade deal announcement, with roughly two dozen more expected before his August 1 deadline. Amidst this, Trump also warned on Tuesday about potential tolls on semiconductor and pharmaceutical imports starting August 1.

The trade deal news, while generally welcomed, was overshadowed by alarming US inflation data. Last month, US inflation jumped to 2.7 percent, a sharp increase from May's 2.4 percent and exceeding forecasts. Economists at Bank of America noted, "Today's report finally provided ample evidence that tariffs are being passed onto consumers." This rise in inflation significantly impacted investor confidence, causing the probability of a Federal Reserve rate cut in September to slip to just above 50 percent. The dollar briefly rallied against the yen, surpassing 149 yen for the first time since April.

Adding to the cautious sentiment, Dallas Fed president Lorie Logan stated that "monetary policy needs to hold tight for a while longer to bring inflation sustainably back to target." However, she also offered a glimmer of hope, suggesting that "some combination of softer inflation and a weakening labour market will call for lower rates fairly soon."

Tech Shines Amidst Mixed Equity Performance

Despite the broader market uncertainties, tech firms extended their gains following an announcement from US titan Nvidia. The company confirmed it would resume exports of key chips, including its H20 artificial intelligence semiconductors, to China. This decision came after Washington pledged to remove earlier export licensing curbs imposed in April. Nvidia CEO Jensen Huang stated that shipments would begin "very soon," boosting tech stocks globally. Wall Street's Nasdaq consequently rose to another record high, even as the S&P 500 and Dow experienced declines.

Across Asia, equity markets were mixed. Hong Kong, Sydney, Seoul, Manila, and Bangkok saw declines, while Taipei, Singapore, Wellington, Mumbai, and Jakarta posted gains. Tokyo and Shanghai remained flat. In Europe, London edged up despite an unexpected jump in UK inflation to an 18-month high, while Paris and Frankfurt dipped.

Economic Outlook: Risks Remain

Vincenzo Vedda, global chief investment officer at DWS, offered a cautious outlook on the markets. He warned of a potential "significant market correction" in the short-term future, emphasizing that prevailing risk factors have not disappeared. Vedda highlighted that "Trump's Beautiful Big Bill will inflate the US budget deficit, and long-term interest rates are set to rise." He also pointed out that tariffs could either drive or contain inflation, depending on their impact on economic growth, and underscored substantial geopolitical risks as an additional significant factor.

Market Snapshot (as of July 16, 2025, close):

  • Tokyo - Nikkei 225: FLAT at 39,663.40
  • Hong Kong - Hang Seng Index: DOWN 0.3 percent at 24,517.76
  • Shanghai - Composite: FLAT at 3,503.78
  • London - FTSE 100: UP 0.1 percent at 8,945.78
  • New York - Dow: DOWN 1.0 percent at 44,023.29 (Tuesday close)
  • Currency & Commodities:
  • Euro/dollar: UP at $1.1620 from $1.1606
  • Pound/dollar: UP at $1.3392 from $1.3383
  • Dollar/yen: UP at 148.88 yen from 148.85 yen
  • Euro/pound: UP at 86.75 pence from 86.69 pence
  • West Texas Intermediate (Oil): UP 0.3 percent at $66.71 per barrel
  • Brent North Sea Crude (Oil): UP 0.1 percent at $68.76 per barrel

(With AFP inputs)