Asia stocks dither as US tariff deadline nears; Nikkei falls ahead of BOJ decision

Investing.com-- Asian stock markets struggled for direction at the start of a busy week, with the Nikkei index slipping ahead of the Bank of Japan’s rate decision, while Hong Kong led regional gains amid optimism over the U.S.–EU trade deal.

Despite trade cheer, most Asian markets posted only slight moves as investors remained cautious ahead of the August 1 deadline set by President Donald Trump.

Monday’s gainers also drew support from Wall Street’s strong weekly finish, where the S&P 500 and Nasdaq closed at new record highs.

U.S. stock index futures also rose in Asian trading hours. Globally, investors await the Federal Reserve rate decision starting Tuesday, and corporate earnings from tech giants including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and others this week.

EU, US sign trade deal; US-China Sweden talks ahead

Broader sentiment improved following news of a U.S.–EU framework deal announced on Sunday. The agreement includes a 15% tariff on EU goods entering the U.S., down from the 30% originally proposed.

Meanwhile, top U.S. and Chinese officials were scheduled to meet in Stockholm on Monday to resolve trade tensions and reportedly seek a three-month extension of their tariff truce.

According to a South China Morning Post report, both sides are looking to extend the tariff truce before it expires on August 12, with no plans to impose new duties or escalate tensions.

Chinese markets opened higher but pared some gains to trade slightly lower. China’s Shanghai Composite index fell 0.2%, while the Shanghai Shenzhen CSI 300 also ticked down 0.2%.

Hong Kong’s Hang Seng index traded 0.5% higher after jumping over 1% in early trade.

South Korea’s KOSPI was largely unchanged. The country’s heavyweight stock Samsung (KS:005930) rose more than 3% after announcing a $16.5 billion chip supply deal, with a Bloomberg report naming the customer to be Elon Musk’s Tesla (NASDAQ:TSLA).

Elsewhere, Australia’s S&P/ASX 200 rose 0.3%, while Singapore’s Straits Times Index edged 0.2% lower.

India’s Nifty 50 also ticked lower, while the Philippines’ PSEi Composite jumped 1.3%.

Japan’s Nikkei drops as BOJ rate decision looms

Japan’s Nikkei 225 dropped 1% after recent one-year highs last week. The broader TOPIX index fell 0.5%.

The Bank of Japan is set to keep its policy rate at 0.5% when it meets on Thursday.

The central bank may offer a less pessimistic economic forecast following last week’s trade agreement with the U.S., indicating rate hikes could resume later in 2025

"Given the US-Japan trade deal struck this week, a big uncertainty factor has been removed. This could offer some relief for the BoJ," ING analysts said in a note.

"Also, possible upward revisions of inflation forecasts should offer markets hints about the near-term rate outlook," they added.