Asian Rebound and Wall Street Caution Ahead of Inflation Data: Global markets saw a marked divergence,

With Asian equities posting substantial gains, supported by the extension of the tariff truce between

the United States and China.

At the same time, Wall Street retreated amid caution ahead of the release of U.S. inflation data,

which is expected to shape the Federal Reserve’s interest rate trajectory.

Contents

Political developments

Asia rebounds after extended trade truce.

The MSCI Asia-Pacific index rose 0.5%,

and the Nikkei 225 jumped to a record high as Japan returned from a holiday.

Shanghai’s stock gained 0.3%, and Hong Kong’s was flat.

In currency markets, the yen extended losses against the dollar for a third straight session, and gold rose 0.3%.

The gains came after U.S. President Donald Trump extended

the suspension of tariffs on Chinese goods for an additional 90 days until early November,

aiming to ease trade tensions and remove a source of market uncertainty.

Trump signed an order extending the truce until November 10, delaying a previously planned hike.

Seb Mullins, head of multi-asset and fixed income at Schroders Australia, said:

“Markets are comfortable with the August 12 extension,

But the absence of a final agreement keeps the risk of renewed trade disputes alive.”

Technology sector leads gains.

The trade truce began when Washington and Beijing agreed
to scale back reciprocal tariff increases
and ease restrictions on exporting rare earth magnets and specific technologies.
Trump wrote on Truth Social: “All other agreement elements will remain the same.”

Sentiment was further boosted by Micron Technology raising its revenue and earnings outlook
and Trump’s signal that Nvidia may be allowed to sell a modified version of its latest advanced AI chips to China.
This news lifted Asian chipmakers, led by Advantest and Samsung Electronics.

Caution on Wall Street ahead of inflation data

Wall Street indices fell as investors avoided big bets before the inflation report.

The S&P 500 stayed below 6,400, and Apple shares retreated after their best week since 2020.
while Intel shares rose ahead of a meeting between its CEO and Trump.

The 10-year U.S. Treasury yield held at 4.28%, and the dollar index rose 0.3%,
Bitcoin briefly topped $122,000,
and gold futures lost after Trump said gold imports would not face tariffs.

Inflation outlook and Fed impact

Attention is now on the CPI data due Tuesday.

This is expected to show a modest 0.3% rise in the core index, excluding food and energy.

Chris Larkin of E*TRADE, part of Morgan Stanley, said:

“Market reaction could be exaggerated if the numbers come in much hotter than expected,

potentially leading investors to think the Fed won’t cut rates soon.”

Markets are pricing in more than two rate cuts by December,

with an 80–90% chance of a quarter-point cut next month.

JPMorgan Chase’s Andrew Tyler sees up to a 2%

The S&P 500 will rise if the data meets or undercuts forecasts,

but it will drop about 3% if it comes in higher.

Andrew Brenner of NatAlliance Securities added,

“Inflation will remain stubborn, but labor market weakness will be the bigger driver for the Fed.”

Stock valuations and investment trends

A 22V Research survey found that 18% of investors expect a positive reaction to the inflation data.

43% are mixed, and 39% are negative.

Mark Hackett of Nationwide noted:

“No strong evidence tariffs are having an impact, retail flows remain strong,

Institutions are hesitant but still buying, and buybacks are heading toward record levels.”

Michael Wilson of Morgan Stanley said weak inflation data could give small-cap

Lower-quality stocks are more supported, but caution is urged.

Citi analysts raised their S&P 500 year-end target to 6,600 from 6,300,

citing strong corporate results and steady forecasts.

RBC Capital Markets’ Lori Calvasina pointed to a more optimistic tone

In recent earnings calls, despite ongoing concerns over demand and capital spending.

Ameriprise’s Anthony Saglimbene added:
“The focus is now on earnings growth,
AI advancements and economic resilience,

But inflation data could change the picture.”

Elevated valuations and hedging recommendations

A Bank of America monthly survey showed 91% of fund managers see U.S. stocks as overvalued

the highest since 2001.

Mark Haefele of UBS Global Wealth Management advised short-term

hedges for heavily invested portfolios and increasing exposure on pullbacks.

BofA’s Mark Cabana cut bond yield forecasts, expecting the Fed to reassess risks.

Two-year yield estimates fell to 3.5% from 3.75%, and 10-year to 4.25% from 4.5%.

Global political and economic updates

U.S. officials are considering Michelle Bowman, Philip Jefferson,

and Lorie Logan for Fed Chair next year,

with Treasury Secretary Scott Bessent to interview more candidates in the coming weeks.

Trump appointed E.J. Antoni, chief economist at the Heritage Foundation, to lead the Bureau of Labor Statistics.

In Australia, the central bank is poised for a third rate cut this year,

Governor Michele Bullock maintained a cautious stance.

On geopolitics, Trump downplayed expectations for his meeting with Russian President Vladimir Putin,

calling it “exploratory. ” He said he would consult Ukrainian and European leaders afterward.

He also hoped China would boost U.S. soybean purchases despite no booked orders.

Asian Rebound and Wall Street Caution Ahead of Inflation Data

Asian Rebound and Wall Street Caution Ahead of Inflation Data

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