Asian Markets React as Trump Visits Japan Ahead of Key Talks

Asian markets experienced a slight downturn on October 28, 2023, as traders monitored President Donald Trump’s visit to Japan. This trip comes just days before critical discussions with China’s Xi Jinping scheduled for October 31 in South Korea. The prospect of a potential agreement between the United States and China to alleviate ongoing trade tensions has generated hope among investors.

On Wall Street, optimism surged on Monday, propelling stocks to record highs. Investors are also gearing up for earnings reports from major technology companies, including Microsoft and Meta. In Tokyo, Trump met with Japan’s newly appointed Prime Minister Sanae Takaichi, affirming that the United States remains “an ally at the strongest level.”

During this visit, the White House announced a new agreement regarding the supply of rare earths. This sector, which is crucial for various technologies, is currently dominated by China, further straining relations between Washington and Beijing.

Market Reactions Across Asia

Following the excitement of the previous trading day, Japan’s Nikkei 225 index retreated slightly after surpassing 50,000 points for the first time. Other markets also showed modest declines, with shares in Hong Kong and Sydney dropping gently, while Seoul’s exchange fell by over 1 percent. In contrast, stocks in Taipei saw minor gains, and the Shanghai market remained stable.

According to Chris Weston of Pepperstone, the strong performance on Wall Street was driven by expectations of an impending trade agreement between the United States and China. He noted that “there seems little in the global macro landscape that appears capable of derailing the current melt-up,” despite the ongoing government shutdown in the US, which he described as “limiting” risk.

The prevailing optimism has persisted despite the backdrop of escalating trade tensions. Trump has previously threatened to impose additional tariffs on China starting November 1. However, he later softened this statement, expressing hope for a productive discussion with Xi during their first in-person meeting since Trump assumed office again.

Key Chinese trade negotiator Li Chenggang indicated on October 27 that a “preliminary consensus” had been reached with the United States, adding to the positive sentiment surrounding the upcoming talks.

As Trump continues his diplomatic efforts in Japan, the global market will be watching closely for developments in the meetings with Xi, which could significantly impact the future of US-China trade relations.