Markets React to Trump-Xi Meeting Amid Currency Fluctuations

SINGAPORE, Oct 30 (Reuters) – Asian stocks showed mixed results on Thursday following a meeting between U.S. President Donald Trump and Chinese President Xi Jinping about trade tariffs and rare earth imports. The yen weakened after the Bank of Japan (BOJ) decided to keep interest rates on hold.

After nearly two hours of discussions, Trump announced an agreement to reduce U.S. tariffs on Chinese imports, contingent on Beijing resuming purchases of U.S. soybeans and enhancing efforts to control fentanyl trafficking. State media in China reported Xi’s call for strengthened cooperation following the meeting, and China’s Commerce Ministry indicated a pause on some retaliatory measures for one year.

Despite the optimistic talks, market sentiment soured as traders expressed concern that this temporary easing of tensions might not last long. Historical trade negotiations often began with positive dialogue but led to setbacks. The MSCI Asia-Pacific index fluctuated, trading down 0.5%. In the U.S., S&P 500 e-mini futures declined 0.1% after initial gains.

Masahiko Loo, a senior strategist at State Street Investment Management in Tokyo, stated, “The meeting represents a tactical pause or temporary de-escalation, rather than a structural breakthrough.” He added that while markets are hopeful about continued discussions, skepticism remains about the formation of a comprehensive agreement.

Central bank decisions worldwide are also contributing to market volatility. The Bank of Japan refrained from changing interest rates as expected but reiterated a possibility of future increases if economic conditions align with their forecasts.

Fred Neumann, chief Asia economist at HSBC in Hong Kong, analyzed the BOJ’s cautious stance, saying, “The BOJ is tip-toeing towards a hike,” and highlighted that December might offer better prospects for a rate increase.

The Nikkei 225 index swung between gains and losses but ultimately closed at a record high, despite the yen hitting an eight-and-a-half-month low against the dollar at 153.46 yen. The currency also fell to an all-time low against the euro, trading at 178.31 yen.

In the U.S., the Federal Reserve recently lowered rates by a quarter percentage point, reflecting uncertainty due to the ongoing government shutdown. Fed Chair Jerome Powell suggested a more cautious approach moving forward, which has impacted market predictions of another rate cut in December.

As the global economic landscape shifts, investors continue to monitor reports and forecasts closely, as seen in the mixed performance of corporate earnings in the tech sector. Although some companies like Meta exceeded revenue expectations, stocks for Microsoft declined amid broader market concerns.