Asian stocks post modest gain, dollar edges down

Asian shares opened cautiously and Japanese equities dipped on lingering concerns over the impact from President Donald Trump’s tariff agenda.

The Nikkei-225 index fell 0.9% at the open as Trump threatened to impose a fresh tariff level on the Asian country. The MSCI Asia-Pacific Index rose 0.2%. Contracts for the S&P 500 were flat after the index notched its best quarter since December 2023 and closed at a record high on Monday. Hong Kong has a public holiday Tuesday.

Wall Street’s bulls drove stocks to all-time highs at the end of a solid quarter amid hopes the US is moving closer to reaching concrete deals with its top trading partners. Bets the Federal Reserve will resume rate cuts powered the best first-half stretch for Treasuries in five years.

Still, broader uncertainty over Trump’s tariff agenda on the long-term structure of the global economy can be seen in the dollar posting a 10.8% slide in the year’s opening six months — its worst first-half performance since 1973. A gauge of the currency slipped 0.1% early Tuesday.

If the negotiations with Japan were to be unilaterally terminated or break down, it could undermine the assumptions behind investing in Japanese stocks, said Hideyuki Ishiguro, chief strategist at Nomura Asset Management.

Trump threatened to impose a fresh tariff level on Japan. The president’s latest round of brinkmanship with Tokyo on Monday comes just over a week before a July 9 deadline for higher tariffs to restart for dozens of trading partners, including Japan. He cited what he said was the country’s unwillingness to accept US rice exports.

With Trump’s trade deadline fast approaching, the European Union is willing to accept an accord that includes a 10% universal tariff on many of the bloc’s exports, but seeks key exemptions. Trump’s top economic adviser said the White House aims to finalize deals with partners after the July 4 holiday.

Just days ahead of the US jobs report, bonds rose Monday. Treasury Secretary Scott Bessent indicated it wouldn’t make sense to ramp up sales of longer-term debt given where yields are, though he held out hope that rates across maturities will drop as inflation slows. Goldman Sachs Group Inc. projects a Fed cut in September as the inflationary effects of tariffs “look a bit smaller” than expected.

The June employment report, due on Thursday, given the July 4 holiday on Friday, is forecast to show growth in the workforce easing to about 110,000 new jobs from 139,000 the prior month, according to economists surveyed by Bloomberg. The unemployment rate is seen nudging up to 4.3%.

For a Fed awaiting more clarity on the potential inflationary impact from tariffs, any pronounced deterioration in the labor market would likely lead to more pressure on officials to lower rates.

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