Asia stocks drop amid tariff uncertainty; China plunges on stalled U.S. trade talks

Asia stock markets trade mostly lower on Friday, mirrored declines in US Treasury yields after a US appeals court reinstated President Donald Trump’s reciprocal tariffs, overturning a previous federal court ruling that had deemed them unlawful, injecting renewed uncertainty into markets and weighing on risk sentiment. Gold prices dropped to around $3,290 per ounce on Friday, on track for a weekly loss of more than 1%. Japan ( NKY:IND ) fell 0.90% to below 38,000 while the broader Topix Index tumbled 0.9% to 2,785 on Friday, reversing gains from the previous session. The Japanese yen appreciated past 144 per dollar on Friday, extending gains from the previous session, after Tokyo’s core inflation came in stronger than expected. Tokyo’s core inflation came in stronger than expected, reinforcing expectations of further Bank of Japan rate hikes. Retail sales in Japan grew by 3.3% year-on-year in April 2025, up from a 3.1% gain in the previous month and surpassing market expectations of a 3.1% rise. Japan’s industrial production fell by 0.9% month-over-month in April 2025, reversing a 0.2% gain in March but performing better than market expectations of a 1.1% drop, flash data showed. Japan’s unemployment rate remained at 2.5% in April 2025, unchanged from the previous month and in line with market expectations. Meanwhile, the jobs-to-applicants ratio was at 1.26 for the second consecutive month, also matching forecasts. Japan’s housing starts contracted 26.6% year-over-year in April 2025, underperforming market consensus of an 18.3% drop while swinging from a 39.1% jump in the previous month. China ( SHCOMP ) fell 0.33% to around 3,340 while the Shenzhen Component dropped 0.9% to 10,030 on Friday, reversing gains from the previous session as renewed tariff risks unsettled investor sentiment, the offshore yuan edged lower to around 7.18 per dollar on Friday, heading for a weekly decline as investor caution prevailed amid stalled US-China trade negotiations. Treasury Secretary Scott Bessent remarked on Thursday that talks with China are currently “a bit stalled” and may require direct intervention from President Trump and President Xi Jinping to make progress. Market sentiment was further dampened by Washington’s decision to tighten export restrictions, effectively barring certain US firms from selling key technologies to China. On the domestic front, investors await upcoming PMI data scheduled for release over the weekend, which is expected to shed light on the economic health of the world’s second-largest economy. Hong Kong ( HSI ) fell 1.54% to 23,211 in Friday morning trade, giving up gains from the day before. India ( SENSEX ) fell 0.24% to 81,432 in early trading on Friday, pausing gains from the previous session as traders turned cautious ahead of the release of Q1 GDP data later today. Australia ( AS51 ) rose 0.31% to 8,390 on Friday, erasing gains from the previous session as renewed concerns over US trade policy weighed on investor sentiment. The Australian dollar slipped to around $0.642 on Friday and was poised to end the week over 1% lower, as a string of disappointing domestic data weighed on investor sentiment. Australia’s retail sales unexpectedly fell 0.1% month-on-month in April, reversing from a 0.3% gain in March which was also the consensus forecast. In addition, building permits also surprised to the downside, adding to concerns about a weakening economic outlook. Australia’s private sector credit increased by 0.7% month-over-month in April 2025, following a 0.5% growth in each of the previous three months, surpassing market expectations of a 0.5% rise. Private house approvals in Australia increased by 3.1% month-over-month to a seven-month high of 9,349 units in April 2025. In the U.S., on Thursday, all three major indexes ended higher amid a mix of earnings optimism and tariff uncertainty. Investors are also awaiting the US PCE price index, due later today, China’s official May PMI data over the weekend, and the RBI’s interest rate decision next Friday. U.S. stock futures fell on Friday amid growing concerns over a slowing U.S. economy, inflation risks, and uncertainty surrounding judicial developments tied to President Trump’s tariffs: Dow -0.07% ; S&P 500 -0.10% ; Nasdaq -0.12% . Currencies: ( JPY:USD ), ( CNY:USD ), ( AUD:USD ), ( INR:USD ), ( HKD:USD ), ( NZD:USD ). More on Asia: Australia retail sales unexpectedly drop 0.1% M/M in April Japan sees strongest retail sales in 3 months; factory output contraction eases; Tokyo core inflation tops forecasts Australia’s monthly CPI slightly higher than expected at 2.4% in April Reserve Bank of New Zealand cuts rate by 25 basis points, projects deeper easing cycle Trump set to unveil trade deal with UK on Thursday – report

Source: Seeking Alpha