Asian Stock Market: Bulls and bears jostle amid Sino-American trade optimism, recession woes

• Asian equities trade mixed as fears of economic slowdown battles the US-China dialogue.
• Italy, Germany amplified recession woes amid concerns over energy, grain production, etc.
• Strong yields also challenge market sentiment amid fears of central banks’ aggression.

Market sentiment remains cautiously optimistic, even as equities flash mixed gains, during Tuesday’s Asian session amid headlines surrounding trade and economic transition.

The comments from Chinese Vice Premier Liu He suggests an improvement in the US-China trade ties, at least for now, which in turn favor the market sentiment. “The two agreed to need to strengthen communication & coordination of macroeconomic policies between China and the US,” said the macro update conveying telephonic talks between China’s Liu He and US Treasury Secretary Janet Yellen.

On the other hand, Italy declared a state of emergency amid the worst drought in 70 years. Further, Germany also flashed signals of economic hardships as energy companies struggle to pay gas prices after the Russia-Ukraine crisis.

In addition to the fears of the recession, strong US Treasury yields also hint at the market’s expectations of tighter monetary policies ahead, which in turn challenge the risk profile.

Amid these plays, MSCI’s index of Asia-Pacific shares outside Japan print mild gains while Japan’s Nikkei 225 also rise 0.62% intraday by the press time. The stocks in Australia and New Zealand print mild gains as investors await the Reserve Bank of Australia (RBA) rate hikes. However, Chinese equities remain pressured amid fears of a retreat by the Chinese tech giant as they seek subsidies to back the US expansion plans. Furthermore, upbeat China Caixin Services PMI also plays a role to confuse traders.

Elsewhere, South Korea’s KOSPI rises over 1.0% as the Bank of Korea (BOK) looks to expand the measure to tame inflation. Additionally, Indonesia’s IDX Composite gained around 1.5% after the nation raised its palm oil export quota.

It’s worth noting that Indian equities remain mildly bid while tracking the US stock futures and the optimism surrounding the US-China trade deal amid the first trading day of the full markets, following Monday’s US holiday.

To sum up, market sentiment remains divided despite the US-China trade optimism as traders await the key data/events scheduled for the week. Among them, Federal Open Market Committee (FOMC) Minutes and the US Jobs report for June will be crucial to watch while US Factory Orders for May, expected 0.5% versus 0.3%, could entertain intraday traders.