Asia stock markets trade mostly higher on Tuesday, China unexpectedly contracted factory activity in May, pressured sentiment. Simultaneously, tensions between Washington and Beijing intensified after Trump claimed China had violated a trade agreement with the U.S. Markets now look forward to a potential meeting between President Trump and Chinese President Xi Jinping after the White House confirmed the two leaders are likely to speak later this week. On Monday, Russia and Ukraine held their second round of direct peace talks following a sharp escalation in hostilities the previous day, but the discussions yielded no significant progress in resolving the three-year-long conflict. Gold fell below $3,370 per ounce on Tuesday, pulling back from a near four-week high, as a slight bounce in the US dollar weighed on the metal. Japan ( NKY:IND ) rose 0.08% to above 37,600 on Tuesday, snapping a two-day decline. The Japanese yen weakened past 143 per dollar on Tuesday, snapping a three-day winning streak, even as Bank of Japan Governor Kazuo Ueda signaled a willingness to raise interest rates if economic and price momentum picks up. Ueda emphasized that Japan's economy is undergoing a moderate recovery, supported by solid business sentiment and improving corporate profits, despite some pockets of weakness. Ueda said the BOJ will review its bond tapering plans while considering feedback from bond market participants. Investors are now awaiting key labor market and household spending data later this week for further indications of Japan’s economic momentum. China ( SHCOMP ) rose 0.32% to above 3,350 while the Shenzhen Component gained 0.1% to 10,050 in post-holiday trade on Tuesday, recouping losses from the previous session despite soft economic data and renewed trade tensions with the U.S., and the offshore yuan strengthened to around 7.2 per dollar on Tuesday, reversing losses from the previous session, as investors shrugged off disappointing PMI data and renewed trade tensions with the U.S. A private survey showed China’s factory activity contracted at the fastest pace since September 2022 in May, weighed by weak output, new orders, and exports. Meanwhile, tensions rose after China denied US accusations of violating a temporary trade deal, instead blaming Washington for breaking the agreement, signaling worsening relations. Hong Kong ( HSI ) rose 1.22% to 23,512 in Tuesday morning trading, rebounding from losses in the prior session amid broad-based sector gains. India ( SENSEX ) fell 0.28% to 81,199, with the Nifty 50 falling below 24,700 in morning trade on Tuesday, marking the third consecutive session of declines amid weakness in the tech sector, consumer durables, and healthcare stocks, as traders remained cautious amid lingering global tariff concerns. Shares of India’s Adani Group fell between 0.7% and 2% after The Wall Street Journal reported on Monday that US prosecutors were investigating whether Adani entities had imported Iranian LPG into India through their Mundra port. Commerce Secretary Howard Lutnick predicts a trade deal between the US and India could be reached soon, citing progress in negotiations and mutual benefits. He suggested early participants in such deals typically receive better deals. Australia ( AS51 ) rose 0.60% to 8,470 on Tuesday, reaching its highest level in over three months, tracking a rebound on Wall Street. The Australian dollar weakened to around $0.647 on Tuesday, reversing sharp gains from the previous session, after Australia's central bank revealed it had considered an outsized rate cut last month. During its May policy meeting, the Australia central bank signaled that policymakers had considered a bold 50 bps cut as a form of "insurance" against mounting global trade risks, but ultimately opted for a more cautious 25 bps reduction to a two-year low of 3.85% in May. Separately, data showed that Australia’s current account deficit narrowed to AUD 14.7 billion in Q1 2025 from a revised AUD 16.3 billion in Q4 2024, albeit larger than market expectations of AUD 12 billion shortfall. Australia’s business inventories rose 0.8% quarter-on-quarter in Q1 2025, exceeding both market expectations and the previous quarter’s 0.2% increase. Corporate profits in Australia unexpectedly dropped by 0.5% quarter-on-quarter (QoQ) in Q1 2025, missing market forecasts of 1.1% growth and reversing an upwardly revised 6.0% expansion in Q4 2024. Australia's independent wage-setting body on Tuesday raised the national minimum wage by 3.5%, effective July 1, amid easing inflation. In the U.S., on Monday, all three major indexes ended higher as market sentiment steadied despite disappointing economic data and rising trade tensions. U.S. stock futures were little changed on Tuesday: Dow -0.34% ; S&P 500 -0.34% ; Nasdaq -0.35% . Investors now turn their attention to key economic reports due Tuesday, including data on job openings, durable goods, and factory orders. Earnings reports are also expected from Dollar General, Signet Jewelers, and Nio. Currencies: ( JPY:USD ), ( CNY:USD ), ( AUD:USD ), ( INR:USD ), ( HKD:USD ), ( NZD:USD ). More on Asia: China’s manufacturing activity unexpectedly contracted in May amid weak output, new orders, and exports RBA Minutes: Rate cut signals caution, data to drive future policy China holds upper hand in trade war – China Market Research Group Trump, Xi expected to talk very soon - report China's factory activity contracts again; recovery fragile amid weak demand & trade tensions
