Asian Shares Slide Amid Renewed Tariff Uncertainty and Rate Hike Fears

Asian markets saw broad-based declines on Friday as investor anxiety deepened following conflicting legal developments surrounding former U.S. President Donald Trump’s global tariffs. The initial relief rally triggered by a U.S. trade court ruling that invalidated many of the tariffs quickly reversed after a federal appeals court temporarily reinstated them. Simultaneously, fresh inflation data from Tokyo heightened concerns that Japan’s central bank may tighten monetary policy sooner than expected, adding further weight to regional sentiment.

Highlights:

• Nikkei 225 dropped 1.4% to 37,892.39 as Tokyo inflation hits 3.6%.

• Hang Seng fell 1.4% to 23,235.94; Shanghai Composite slipped 0.3% to 3,353.07.

• South Korea’s Kospi declined 0.6% to 2,703.64 ahead of presidential elections.

• Australia’s ASX 200 was flat at 8,404.50.

• Investors react to reversal of U.S. court decision on Trump tariffs.

Japanese Inflation Surges, Raising Rate Hike Expectations

Japan’s markets led the decline across Asia after Tokyo’s core consumer inflation rate, excluding volatile fresh food prices, jumped to 3.6% in May, exceeding market forecasts. The unexpected spike has intensified speculation that the Bank of Japan (BOJ) may tighten monetary policy more aggressively in the coming months. Investors now fear the BOJ may end its ultra-loose stance sooner than expected, increasing costs for businesses and putting pressure on equity valuations.

The Nikkei 225, which had rallied briefly after the initial U.S. court ruling, shed 1.4% by mid-day Friday, reversing gains from earlier in the week.

Highlights:

• Tokyo core inflation accelerated to 3.6% in May.

• Higher inflation could prompt BOJ to raise rates.

• Rate hike fears added to broader tariff-related anxieties.

Tariff Legal Confusion Deepens Global Trade Concerns

The global equity landscape has been roiled by conflicting U.S. court decisions on Trump-era tariffs. While the U.S. Court of International Trade ruled late Wednesday that the 1977 International Emergency Economic Powers Act did not authorize the tariffs, the Federal Circuit Court of Appeals on Thursday allowed the continuation of tariff collection pending an appeal. The back-and-forth has left global investors uncertain about the trade outlook, particularly in export-heavy economies like South Korea, Japan, and China.

Although some Trump tariffs—such as those on steel, aluminum, and autos—remain unaffected due to being issued under different legislative authorities, the broader market remains cautious. Ulrike Hoffmann-Burchardi of UBS noted that Trump can still impose far-reaching tariffs by other legal means, keeping longer-term risks alive.

Highlights:

• Initial court ruling deemed tariffs unauthorized under emergency powers law.

• Appeals court reinstated tariffs pending further legal review.

• Markets remain uneasy about potential trade disruptions.

Wall Street Gains Offer Little Relief as Tariff Fears Linger

While U.S. markets closed higher on Thursday, the gains did little to support Asian equities amid global trade uncertainty. The S&P 500 rose 0.4%, Dow gained 117 points (0.3%), and Nasdaq added 0.4%, powered primarily by Nvidia’s strong earnings beat. The AI-chip leader posted $44.06 billion in quarterly revenue, with shares rising 3.2%, buoying the tech sector.

However, caution prevailed in retail as Best Buy tumbled 7.3%, despite beating earnings forecasts. The retailer revised its full-year revenue and profit guidance downward, citing the assumption that current tariff levels will persist, underscoring how businesses are recalibrating for a sustained protectionist environment.

Highlights:

• Nvidia leads Wall Street gains after strong Q1 results.

• Best Buy slashes guidance, blames tariff concerns.

• Tech strength offset by retail and macroeconomic caution.

Bond Yields, Oil Prices, and Currency Moves Reflect Risk Aversion

The broader risk-off sentiment extended into bond and commodity markets. U.S. Treasury yields declined following mixed economic data, including a revision that showed the economy shrank less than previously estimated and a modest rise in jobless claims. The 10-year Treasury yield fell from 4.47% to 4.43%.

Crude oil also saw a decline, with U.S. benchmark WTI down 30 cents to $60.64, and Brent crude falling 31 cents to $63.84, as legal wrangling over trade threatened to disrupt global demand expectations.

In currency markets, the U.S. dollar slipped to 143.92 yen, while the euro declined to $1.1355, reflecting shifts in safe-haven demand and recalibrated interest rate expectations across regions.

Highlights:

• 10-year U.S. Treasury yield fell to 4.43%.

• WTI crude down to $60.64, Brent crude at $63.84.

• Dollar weaker against yen; euro also declined slightly.