Asia stocks fall ahead of Fed decision, trade talks

July 29, 2025 (MLN): Asia-Pacific markets declined on Tuesday amid growing caution over the outcome of U.S.-China trade negotiations and the looming U.S. Federal Reserve policy decision.

The MSCI Asia-Pacific index excluding Japan dropped 0.7%, while Japan’s Nikkei dipped 0.8%.

Chinese blue chips also retreated, down 0.1%, as investors awaited clarity from the ongoing trade talks, as CNBS reported.

Market sentiment remained fragile ahead of the Fed’s Wednesday meeting, where policymakers are expected to decide on interest rates.

Futures pricing reflects a 97% likelihood that rates will stay at 4.25%-4.5%, although analysts expect possible dissents advocating for cuts, with bets for a September reduction gaining traction.

European markets, recovering slightly from a sharp sell-off on Monday, saw EUROSTOXX 50 futures edge up 0.2%, while FTSE and DAX futures each added 0.1%.

Concerns around European economic prospects were exacerbated by a jump in tariff levels.

Relief over a 15% levy turned to concern when compared to the pre-Trump era range of just 1% to 2%.

French and German leaders criticized the new rate, citing growth headwinds and a drag on stocks, bond yields, and the euro.

JPMorgan economists highlighted the scale of the change, describing it as a reversal of a century of U.S. global trade leadership.

They warned that although a recession is not their base case, the risk remains elevated at 40%.

Adding to market stress, oil prices rose after U.S. President Donald Trump set a 10–12 day deadline for Russia to progress toward ending the war in Ukraine or face tighter sanctions on oil exports.

Brent crude ticked up 0.1% to $70.10 per barrel after a 2.3% gain on Monday, while U.S. crude held steady at $66.73.

Currency markets reflected broader risk aversion.

The euro, which had tumbled 1.3% on Monday in its steepest fall since mid-May, steadied at $1.1592, hovering just above support at $1.1556.

Meanwhile, the dollar index firmed to 98.674, boosted by a short-covering rally, and the yen slipped to 148.63 per dollar, a one-week low.

In the U.S., optimism over earnings from major tech firms Apple, Microsoft, and Amazon provided support.

S&P 500 futures inched up 0.1%, and Nasdaq futures climbed 0.2%.

Treasury yields held firm, with 10-year notes steady at 4.408% after Monday’s uptick.

Investors braced for signals from the Fed, especially given the potential inflationary impact of new tariffs.

Upcoming U.S. economic data, including Q2 GDP figures, forecast to show 2.4% annualized growth after a 0.5% Q1 contraction, and Tuesday’s job openings data, are expected to shape market expectations ahead of Friday’s crucial payroll report.

Canada’s central bank is also scheduled to meet on Wednesday, with markets anticipating a steady rate of 2.75% as policymakers monitor the trajectory of U.S. trade discussions.

In the commodities space, copper and iron ore prices remained under pressure, while gold was flat at $3,316 an ounce.

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