Asian Stocks Rise as Dollar Trims Losses After Decline

Asian markets showed gains following a second consecutive rally on Wall Street, while the dollar reduced its losses as former President Donald Trump dismissed claims that his proposed tariffs might be softened.

A regional equities index rose 0.7%, with gains in Japan, South Korea, and Australia. Mainland Chinese stocks saw mixed movement, whereas Hong Kong stocks experienced slight early losses. Tencent Holdings Ltd. dropped as much as 7%, and Contemporary Amperex Technology Co. fell over 6% after the Pentagon added them to a blacklist designating certain Chinese firms as military-related entities.

In the U.S., futures remained steady in Asian trading after the S&P 500 rose 0.6% and the Nasdaq 100 climbed 1.1% on Monday. Nvidia Corp. reached an all-time high ahead of a keynote speech by its CEO, Jensen Huang.

The dollar index, which measures the currency’s strength, partially recovered after Trump denied a Washington Post report claiming that his team was considering limiting tariffs to essential imports. On Monday, the dollar fell as much as 1% before narrowing its losses to 0.6%. It remained flat in Asia on Tuesday.

Market participants are bracing for potential turbulence as Trump's policy proposals could exacerbate trade tensions between the U.S. and global markets. The U.S.’s decision to blacklist additional Chinese companies underscores the ongoing strain in U.S.-China relations, which could dampen the outlook for the world’s second-largest economy.

“There are concerns about the yuan weakening further, which could hurt sentiment,” said Sat Duhra, portfolio manager at Janus Henderson Investors. “Trump’s reaffirmation of broader tariffs has also added another layer of uncertainty. We’re maintaining a cautious stance on China while favoring select high-yield names that have outperformed in the region.”

Treasury yields in Asia held steady after the 30-year U.S. note reached its highest level in over a year on Monday, and the 10-year yield increased by three basis points to 4.63%.

The yen weakened to 158.42 per dollar, its lowest level since July 2024, as traders responded to robust U.S. economic data released during Japan’s recent holiday. Analysts predict further weakening of the yen ahead of U.S. jobs data expected on Friday.

The recent market recovery “shows the persistence of the ‘buy the dip’ mindset,” noted Mark Hackett of Nationwide. “Investors remain heavily focused on tech stocks. However, 2025 may not yield easy double-digit returns from the S&P 500 alone. Success will require more strategic and creative investments.”

The Canadian dollar leveled out after a brief rise following Prime Minister Justin Trudeau’s resignation as leader of the Liberal Party.

In global credit markets, the traditionally active start to the year has been particularly strong, with spreads near a 17-year low. On Monday, Asia-Pacific borrowers issued approximately $7 billion in dollar-denominated bonds, the highest since June. Additional issuances are expected, with over a dozen regional issuers signaling plans to market debt in U.S. dollars.

Friday’s labor report is anticipated to show a slowdown in job growth, reflecting a year of gradual cooling but still-healthy employment conditions. Analysts believe the data will reinforce the Federal Reserve’s cautious approach to rate adjustments amid resilient economic activity and persistent but easing inflation.

Federal Reserve Governor Lisa Cook stated on Monday that the central bank can adopt a more measured approach due to the strong labor market and lingering inflation pressures.

In the cryptocurrency market, Bitcoin surged past $100,000. Meanwhile, oil prices stabilized after declining for the first time in six sessions, with technical indicators suggesting the recent upward trend may have been overextended.