Asian Shares Rebound After Two Weeks of Declines
Asian equities opened higher on Monday after two consecutive weeks of losses, as easing trade tensions between the US and China boosted investor sentiment across the region.
Major benchmarks in Japan and South Korea climbed in early trading, while Australia’s market dipped slightly after a volatile Friday session that saw sharp declines in US regional banking shares.
A broad gauge of the US dollar edged higher, while oil prices steadied after three weeks of declines. Meanwhile, US equity futures traded flat, paring earlier gains, and gold slipped by 0.5% as investors rotated toward riskier assets amid hopes of a breakthrough in trade discussions.
Donald Trump Signals Softer Tone on China Tariffs
Global sentiment improved after US President Donald Trump sought to calm fears of a deepening trade conflict, saying that the steep tariffs he had threatened to impose on Chinese imports “wouldn’t be sustainable.”
The US and China are expected to resume talks this week, with Treasury Secretary Scott Bessent and Vice Premier He Lifeng tasked with negotiating a path to ease tensions and avoid new escalatory measures.
Analysts say markets are cautiously optimistic.
“The markets are pricing in that things will de-escalate,” said Kyle Rodda, Senior Market Analyst at Capital.com in Melbourne. “However, the markets are likely to remain jittery until such backdowns are explicitly announced.”
According to reports, Bessent held a virtual meeting with He Lifeng on Friday evening, describing the talks as “frank and detailed.” The two sides reaffirmed plans to meet in-person next week, signaling a potential step toward compromise. US Trade Representative Jamieson Greer also participated in the discussions, underscoring Washington’s intent to stabilize the relationship.
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Efforts to Avoid Full-Blown Trade War Offer Market Relief
President Trump’s comments and Bessent’s diplomatic tone suggest an effort by Washington to soothe global markets, which have been rattled by fears of a full-scale US-China trade war.
Such a conflict could have severe implications for global supply chains and growth, especially in Asia’s export-driven economies.
“There’s a prevailing belief that US–China trade headlines will remain skewed toward a positive outcome,” noted Chris Weston, Head of Research at Pepperstone Group.
Still, traders remain watchful as both nations balance domestic political pressures with international economic realities. The global market’s next cues will likely depend on whether both sides commit to de-escalation during the upcoming in-person meetings.
China’s Economic Data and Political Meeting in Focus
Investors in Asia are closely watching China’s latest economic data, due Monday, which could show growth slowing in the third quarter despite a recent boom in exports. According to a Bloomberg survey, the world’s second-largest economy faces headwinds from weak domestic demand and ongoing property market distress.
Meanwhile, Chinese political leaders are set to gather in Beijing for a four-day session known as the Fourth Plenum. Traders are anticipating fresh measures to extend the country’s strongest equity rally in eight years and stabilize the yuan.
Although a detailed economic plan is not expected until March next year, investors will carefully analyze the post-meeting statement for clues about fiscal and monetary policy direction, as well as potential trade-related announcements ahead of a possible meeting between President Xi Jinping and Donald Trump.
Japan’s Political Transition Adds Market Uncertainty
Beyond trade developments, attention in Asia has turned to Japan, where a crucial parliamentary vote on Tuesday will determine the nation’s next prime minister.
The leadership outcome is expected to provide clarity on economic policy continuity, particularly concerning fiscal stimulus and the Bank of Japan’s ultra-loose monetary stance.
Analysts suggest that markets may see short-term volatility until investors gain confidence in the new government’s policy trajectory. The Nikkei index rose in early trading as investors bet on stability and pro-growth reforms, but the final outcome will be closely scrutinized by foreign investors.
Geopolitical and European Developments Add to Volatility
In other global news, tensions in the Middle East briefly weighed on sentiment after Israel launched airstrikes on Hamas positions in Gaza on Sunday, suspending all aid shipments following a lethal Palestinian ambush that left two soldiers dead.
While markets largely shrugged off the incident, analysts warn that prolonged escalation could impact crude oil prices and broader risk sentiment.
Separately, French bond futures opened lower after S&P Global Ratings downgraded France to A+ from AA-, citing elevated budgetary uncertainty. France has now lost its double-A rating at two of the three major credit rating agencies within a month, a development that could force certain institutional investors to reduce their holdings of French government debt.
Outlook: Markets Cautiously Optimistic Amid Trade Hopes
As the week unfolds, Asian investors remain cautiously optimistic that the US-China trade talks will yield tangible progress.
However, with China’s economic data, Japan’s leadership vote, and geopolitical tensions all in play, volatility is expected to remain elevated.
Market experts say the coming days could define the next phase of the region’s economic trajectory.
If diplomatic overtures between Washington and Beijing result in concrete action, the Asian market rally could gain momentum, setting the tone for a stronger global rebound into the final quarter of 2025.
