Asian stock indices saw muted gains on Thursday, reflecting a cautious stance among investors. While Japan led the rise with reports of new US Japan trade talks, South Korea’s KOSPI struggled following disappointing GDP data.

Market Overview

• Nikkei 225: +0.9%

• TOPIX: +0.8%

• MSCI Asia ex-Japan: +0.5%

• KOSPI: -0.3% due to GDP contraction outweighing strong earnings from SK Hynix.

• US Futures: S&P 500 Futures +0.4%

Drivers of Market Caution

Tariff Reduction Not Guaranteed

• President Trump’s Comments: He indicated potential tariff cuts depending on Beijing’s willingness to engage.

• China’s Response: A lack of proactive measures from Chinese officials cools hopes.

Fed Policy Outlook

• Powell’s Position Secure: Trump’s walk-back on firing Powell eased volatility, but uncertainty remains.

Japan’s Trade Talks Improving Sentiment

• New Talks: Japan’s Economic Revitalization Minister’s visit is expected to boost trade relations.

• Positive Moves from Automakers: Toyota and Honda shares rose on exemption news regarding auto parts tariffs.

What to Watch Next

• Flash PMIs (Wednesday): Early indicators of trade effects on manufacturing.

• Korean GDP Adjustments: Potential upward revisions could benefit KOSPI.

• Trade Announcements: Formal discussions on U.S. China or Japan relations will shape market direction.

Amid mixed signals, Asian markets may remain in a holding pattern. Investors should focus on sectors with robust valuations and stable fundamentals as they navigate this cautious landscape.