Asia stocks mostly higher as tariff truce supports sentiment

U.S. President Donald Trump extended a tariff truce with China by another 90 days on Monday, staving off triple-digit duties on Chinese goods, a move that was largely expected by investors and markets.

Investor sentiment in recent weeks has been supported by expectations of rate cuts by the U.S. Federal Reserve, resilient U.S. corporate earnings as well as clarity on U.S. trade levies on trading partners.

Japan's Nikkei .N225 climbed to a record high and was last up 2% as the country's markets reopened after a public holiday on Monday, tracking other global indices this year. Australia's benchmark index .AXJO also hit a record high, ahead of a monetary policy meeting at which the central bank is widely expected to cut interest rates. .T.AX

That left MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS a tad higher. China's blue-chip stocks .CSI300 were flat while Hong Kong's Hang Seng index .HSI eased 0.1% in early trading.

Markets have held modest ranges in recent weeks, waiting to see whether the world's two largest economies can agree on a durable trade deal or if global supply chains will again be upended by the return of steep import levies.

The U.S.-China tariff truce extension "preserves the status quo for now, so no immediate implications for investment markets," said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney.

The U.S. and China have engaged in a tit-for-tat tariff duel throughout the year, culminating in trade talks in Geneva, London and Stockholm since May that focused on bringing retaliatory tariffs down from triple-digit levels.

The latest truce extension clears the way for investors to focus on an action-packed week dominated by U.S. inflation data, a central bank policy decision in Australia and the first summit between U.S. and Russian leaders since June 2021.

Traders are pricing in a 25 basis points rate cut later on Tuesday from the RBA with another cut expected by November. Investor attention will be on comments and forecasts from the central bank.

"The uncertainties are around its guidance, in particular whether it still sees further scope to cut rates and whether it will remain gradual and measured," said AMP's Oliver.

Globally, the spotlight will be on the release of U.S. consumer price inflation data later on Tuesday. Economists polled by Reuters have forecast that month-on-month core CPI edged up 0.3% in July, faster than the 0.2% in the previous month.

"CPI will be a key test for market tone. Softer data could give small-caps a lift, but for now, mega-caps remain firmly in control," said Marc Velan, head of investments at Lucerne Investment Management.

An upside surprise on inflation may also add caution to market expectations of rate cuts by the Federal Reserve this year.

Investors are currently pricing in at least two rate cuts from the Fed in 2025 while J.P. Morgan expects the Fed to deliver four successive rate cuts starting in September.

In commodities, gold prices XAU= were last at $3,354, having dropped nearly 1.6% on Monday after Trump said tariffs will not be placed on imported gold bars. GOL/

Oil prices were steady ahead of the August 15 meeting between Trump and Russian President Vladimir Putin, aimed at negotiating an end to the war in Ukraine. The talks follow increased U.S. pressure on Russia, raising the prospect of penalties on Moscow if a peace deal is not reached. O/R

"The market is not pricing in significant outcomes from the meeting, but any shift in geopolitical tone could have marginal impact, particularly for commodities and certain emerging market assets," said Lucerne's Velan.

Currencies were mostly calm in early trading, with the dollar steady against major peers the euro and the yen. Cryptocurrencies bitcoin BTC= and ether ETH= were a tad lower after rallying in the previous session.