Asian stock markets began the trading day with a palpable sense of caution on Tuesday, as investors navigated a landscape marked by lingering uncertainty over US trade policies while bracing for a pivotal week filled with high-impact corporate earnings and critical economic data releases.
The tentative mood followed a late recovery in US stocks but suggested conviction remained fragile.
Early trading across the Asia-Pacific region reflected a holding pattern.
While Australia’s benchmark S&P/ASX 200 index posted a modest 0.4% gain, futures contracts for Hong Kong and mainland China indicated only marginal opening movements.
This subdued start came after US stocks managed to erase losses late Monday, securing a fifth consecutive day of gains – the longest such streak since November.
However, futures for the S&P 500 swung between small gains and losses in early Asian hours, signaling underlying hesitation.
Trading in cash US Treasuries was closed due to a public holiday in Tokyo, with activity set to resume later in the European session.
The US dollar held relatively steady after declining in the previous session.
US rally faces stern test amid data deluge
The recent upward momentum in US equities now confronts a significant series of tests this week. Investors are keenly awaiting crucial US economic indicators, including updates on employment, first-quarter Gross Domestic Product (GDP), and core inflation figures.
These data points will provide vital insights into the health of the US economy amid President Donald Trump’s tariff strategies.
Simultaneously, the first-quarter earnings season reaches its zenith, with tech titans Apple, Microsoft, Amazon, and Meta Platforms among the approximately 180 S&P 500 companies (representing over 40% of the index’s market value) scheduled to report results.
“This will be one of the busiest weeks of the year,” Anthony Saglimbene, chief market strategist at Ameriprise Financial, told CNBC.
Ongoing trade headlines, an economic calendar filled with key releases and the peak week of the earnings season, including several Magnificent Seven companies reporting results, should keep investors’ heads spinning.
Trade policy fog lingers despite recent calm
While some market calmness returned over the past week following earlier volatility sparked by shifting US trade policies, fundamental uncertainty persists.
Hopes for sustained equity gains are partly pinned on a potential softening of the US stance towards China.
According to Chris Larkin at E*Trade from Morgan Stanley, a continued rally would likely require investors to see a clear “dovish pivot” from the White House on trade.
However, recent signals suggest otherwise. Treasury Secretary Scott Bessent indicated to CNBC that the US has effectively put China talks “to the side for now,” focusing instead on seeking deals with numerous other countries.
He implied the responsibility lies with Beijing to de-escalate the tariff conflict, suggesting no quick resolution to the levies impacting the world’s two largest economies.
Reinforcing this, China’s Foreign Ministry again denied on Monday that the nations were discussing winding back tariffs.
The real-world impact of this uncertainty is becoming more apparent. A report from the Federal Reserve Bank of Dallas highlighted a significant weakening in Texas manufacturing activity, with surveyed executives using terms like “chaos” and “insanity” to describe the turmoil caused by tariffs.
Dollar dynamics and strategic positioning
The US dollar faced selling pressure on Monday as investors reacted to the perceived risks stemming from Trump’s policies – a trend JPMorgan Chase & Co. analysts expect to persist.
Speculative traders reportedly increased their bearish bets against the dollar through April 22.
However, Morgan Stanley’s Michael Wilson suggested a weaker dollar could ironically support US corporate earnings, potentially aiding US stock outperformance relative to global peers, although he anticipates the S&P 500 remaining range-bound (5,000-5,500) without a definitive China trade deal and clearer economic signals.
Amidst this complex environment, investors are advised to maintain a long-term focus. “Investors should continue to focus on the long term, with an eye toward companies with high earnings achievability, limited tariff exposure, and quality balance sheets,” recommended Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team.
Elsewhere, commodity markets saw crude oil open little changed on Tuesday.
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