Asian equity markets traded cautiously on Monday as many benchmarks remained subdued due to public holidays, disappointing earnings from Australia, and anticipation of significant global economic events. Key markets in Japan, China, Hong Kong, and South Korea were closed for public holidays, resulting in thinner trading volumes and heightened investor uncertainty ahead of the Federal Reserve’s upcoming policy meeting and China’s soon-to-be-released economic data.

Setback from Westpac Earnings

The S&P/ASX 200 index saw a 0.7% decline, largely driven by a 1.6% drop in the financials sector after Westpac Banking Corporation (ASX:WBC) recorded a 1% decrease in half-year net profit. Concerns regarding tighter lending margins countered any growth in loan volumes. Shares of Westpac dropped over 3% at the open, contributing to the poor performance in the financial sector.

Westpac indicated that growing uncertainties from escalating global trade risks, particularly regarding U.S. tariffs, clouded its future economic forecasting. The bank’s insights contribute to the market’s watchfulness ahead of significant data from China that may reveal the impact of U.S. tariffs on global demand. Investors eagerly await China’s upcoming monthly trade data, consumer price index, and services PMI reports.

Regional Indices Trade Within Narrow Ranges

With major markets closed, activity in Southeast Asia remained largely unchanged. The Straits Times Index in Singapore slipped 0.1%, while India’s Nifty 50 futures also registered a slight 0.1% decline against a backdrop of renewed geopolitical tensions. The Philippines’ PSEi Composite dropped 0.3%, whereas Malaysia’s KLCI saw a modest gain of 0.2%. Indonesia’s Jakarta Composite was a rare gainer, rising 0.4%.

U.S. stock index futures dipped during Asian trading hours, reflecting market caution ahead of the Fed meeting. Traders are closely monitoring the Fed’s inflation perspective and interest rate trajectory, as these remain central to market direction.

U.S.-China Trade Discussions Under the Microscope

Investors found some comfort in China’s assertion that it is assessing trade discussions with the U.S. and insists that negotiations require mutual respect and the lifting of unilateral tariffs. Reports indicated that the U.S. is expanding communication channels in hopes of rekindling formal discussions.

Nevertheless, investor wariness continues amid the realization that the impact of extended tariff enforcement will soon be evident in China’s trade balance data, which is set to be released later this week.

Analysts Predict Substantial Export Reductions

ING analysts warned that Chinese exports to the U.S. could see a double-digit year-on-year decline, with shrinking imports potentially resulting from diminishing external demand and ongoing geopolitical tensions. This upcoming data, due Friday, is expected to reveal the extent to which China feels the pressure of tariffs.