Asian stocks posted modest gains on Tuesday while the U.S. dollar dropped to a six-week low, as market sentiment remained clouded by persistent trade concerns. Investors are treading cautiously ahead of major developments expected later this week.
White House Press Secretary Karoline Leavitt confirmed on Monday that President Donald Trump and Chinese leader Xi Jinping are likely to hold a phone conversation this week. The announcement came just days after Trump accused Beijing of violating a previous agreement aimed at reducing tariffs and trade restrictions.
Markets are closely watching the anticipated call between the two leaders, as trade tensions between the world’s two largest economies continue to simmer. The ongoing tariff dispute has already disrupted financial markets and contributed to a sense of economic unease.
Adding to concerns, data released on Monday showed that the U.S. manufacturing sector contracted for the third straight month in May. Delivery times for supplies also lengthened to the slowest pace in nearly three years, signaling the toll of elevated tariffs.
“The May ISM data confirmed that tariff pressures are beginning to bite,” noted economists at Wells Fargo. “Manufacturers are facing slower activity, longer delivery delays, and shrinking inventories.”
A similar trend was seen in China, where a private-sector survey revealed that manufacturing activity contracted in May for the first time in eight months. The report suggests that U.S. tariffs are beginning to weigh heavily on Chinese producers.
Trade uncertainty also dragged down U.S. stock futures during Asian trading hours, wiping out modest overnight gains from Wall Street. Nasdaq and S&P 500 futures both dropped more than 0.3%. In Europe, futures for the EUROSTOXX 50 and FTSE were up only 0.1%.
Meanwhile, the MSCI index of Asia-Pacific shares outside Japan rose 0.4%, reversing earlier losses. Japan’s Nikkei inched up 0.1%.
“Trump once again has the market sentiment in the palm of his hand,” said Matt Simpson, senior market analyst at City Index. “I suspect we’ll hear about a ‘really great call’ or something along those lines,” he added, referring to the anticipated Trump-Xi conversation.
“But we’re still waiting on China to confirm, and they tend to take their time on these matters. Until we get firm confirmation, price action could remain choppy and prone to false breakouts,” Simpson warned. He also pointed to the looming June 4 deadline the U.S. has set for receiving the “best trade offers” from its international partners.
The Trump administration has urged countries to present their most favorable trade proposals by Wednesday, as it aims to accelerate negotiations ahead of a self-imposed deadline just five weeks away.
In China, mainland markets reopened from an extended break with modest gains. The blue-chip CSI300 index rose 0.3%, while the Shanghai Composite Index climbed 0.4%. Hong Kong’s Hang Seng index surged over 1%, rebounding from a one-month low recorded on Monday.
Jobs Report on the Horizon
The U.S. dollar weakened early Tuesday, touching a six-week low against a basket of major currencies. Investors are now focused on Friday’s release of non-farm payroll data, which will offer a critical snapshot of the health of the U.S. economy.
A spike in unemployment could be one of the few triggers that might prompt the Federal Reserve to reconsider a policy shift toward easing. So far, market participants have largely ruled out a rate cut this month or next.
The dollar index edged up slightly to 98.86, recovering some of its earlier losses. The euro also hit a six-week high before easing to $1.1421, while the British pound slipped 0.14% to $1.3525.
