HONG KONG: Asian markets extended the week's gains Thursday (July 24) on optimism other countries will follow up Japan's US trade deal with ones of their own, with speculation building that the European Union is on course.
Investors have been on a roll in recent weeks on bets that governments will eventually hammer out pacts with Donald Trump ahead of the US president's Aug 1 deadline.
The mood has been upbeat since news that Japan had reached a deal to lower sweeping tariffs from 25 per cent to 15 per cent, including those on the country's crucial car sector.
The breakthrough fanned hopes that others were in the pipeline.
However, there is talk that the European Union is edging towards an agreement. Reports say Brussels could get something similar to Japan, with tariffs cut to 15 per cent -- from the threatened 30 per cent.
The Financial Times said the two would waive tariffs on some products, including aircraft, spirits and medical devices.
That came after US Treasury Secretary Scott Bessent said negotiations were making progress, with talks planned later in the day between the bloc's top trade negotiator and his American counterpart.
Analysts said a deal with Washington's biggest trading entity would provide a massive boost to equities
However, failure to reach a deal, triggering Trump's 30 per cent levies on Aug 1, could cause havoc on markets, analysts warned.
France has been loudest in insisting Brussels must show it is willing to deploy its trade weapon, known as the anti-coercion instrument -- allowing officials to take measures such as import and export restrictions on goods and services.
Neil Wilson at Saxo Markets warned that would end up "effectively killing trade between the two... the nuclear option is on the table it seems, but for the moment expectation seems to be veering towards a deal".
After another record day for the S&P 500 and Nasdaq on Wall Street, Asia picked up the baton and ran.
Tokyo piled on two per cent, having jumped more than three per cent Wednesday on the trade deal, while Hong Kong continued its standout year with another advance.
Shanghai, Seoul, Singapore, Wellington, Taipei and Manila also rose.
Traders are also keeping an eye on developments in Tokyo after Japanese Prime Minister Shigeru Ishiba denied discussing his resignation with party elders on Wednesday, as speculation about his future intensified following a weekend election debacle.
Despite the saga, the yen extended its gains, briefly hitting 145.86 per dollar as the trade deal allows investors to turn their attention to the Bank of Japan's policy meeting next week hoping for guidance on its next interest rate hike.
The unit had been sitting around 147.90 before the deal.
Bank officials have held off rocking the boat on the issue amid tariff uncertainty, but observers say the agreement can allow them to reconsider lifting in October. - AFP
