By Rocky Swift and Johann M Cherian
TOKYO (Reuters) -Global stocks were flat to marginally higher on Tuesday, as investors took in their stride the latest twist in U.S. President Donald Trump’s tariff roll-out, while the yen slid on planned 25% duties on goods from Japan.
Trump sent letters to 14 countries on Monday, including major Asian trading partners such as Japan and South Korea, saying they face sharply higher tariffs on imports into the United States from a new deadline of August 1.
However, market reaction has broadly been guarded, compared to the sharp declines witnessed in the aftermath of Trump’s sweeping tariff announcement three months ago, on expectations that countries would strive to seal trade deals with the United States before the new deadline.
Europe’s STOXX 600 index wavered near the unchanged mark and the euro firmed 0.1% as sources said the European Union will not be receiving a letter setting out higher tariffs and that the EU could reach a trade deal by Wednesday.
“While a comprehensive trade deal is unlikely before the deadline, there is cautious optimism that a preliminary agreement can be reached to avert the immediate imposition of higher tariffs,” Daniela Hathorn, a senior market analyst at Capital.com said.
“Such an agreement would provide a foundation for continued negotiations aimed at resolving the broader trade disputes between the EU and the U.S., improving risk appetite in European stocks and the euro.”
Across the Atlantic, futures tracking Wall Street’s S&P 500 steadied after a knee-jerk selloff in the previous session.
Goldman Sachs raised its return forecasts for the benchmark index, citing expectations of U.S. interest rate cuts and continued fundamental strength of major large-cap stocks as key drivers of its positive outlook.
Still, the lack of progress on the trade front has been looming over markets ever since Trump capped all of the so-called reciprocal tariffs with trading partners at 10% for three months in April to allow for negotiations.
However, only two agreements, with Britain and Vietnam, have been reached and in June, Washington and Beijing agreed on a framework covering tariff rates, restoring a fragile truce in their trade war.
Concerns are that Trump’s erratic style of policymaking could put off business investment, stall global economic growth and stoke inflation pressures. This would also complicate the work of central banks such as the U.S. Federal Reserve that have currently taken a wait-and-see approach on monetary policy.
TARIFFS ON ASIA
Southeast Asia’s biggest economies are among those facing the highest of U.S. tariffs and Japan and South Korea scrambled to negotiate with Washington for concessions.
Hopes of trade deals buoyed risk appetite for regional assets on Tuesday as MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%, while Japan’s Nikkei reversed early declines and finished 0.26% higher.
South Korean shares recorded their strongest daily gain in two weeks and the won firmed 0.4%.
Export-dependent Japan’s yen hit a two-week low of 146.65 per dollar and also weakened against a host of other currencies.
Elsewhere, the Aussie dollar firmed 0.7% against the U.S. currency after the Reserve Bank of Australia left policy rates unchanged, defying expectations for a cut.
The RBA left its cash rate steady at 3.85%, a shock for markets that had confidently priced in a cut, saying the majority of the board wanted to wait for more information to confirm inflation was slowing.
In commodities, U.S. crude was last flat at $67.87 a barrel as investors assessed a higher than expected increase to OPEC+ output for August. [O/R]
Traditional safe-haven assets such as gold prices slipped, while government bond yields in Europe and the U.S. inched higher with focus on a series of bond auctions during the day.
(Reporting by Rocky Swift and Johann M Cherian; Editing by Sonali Paul, Saad Sayeed and Emelia Sithole-Matarise)
