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Most Asian stock markets extended losses on Thursday, dragged down by renewed U.S.–China trade tensions and profit-taking following recent rallies in Japan and South Korea.
By mid-morning, Japan’s Nikkei 225 had fallen 1.5%, while China’s CSI 300 dropped 0.6% and the Shanghai Composite slipped 0.7%, leading the regional downturn.
U.S. Trade Measures Reignite Market Caution
Sentiment soured after reports that Washington was preparing new restrictions on high-tech exports to China—including laptops, jet engines, and other software-powered goods—in response to Beijing’s rare earth export curbs.
While the measures are still under discussion, the report signaled a hardening U.S. stance ahead of a potential Trump–Xi meeting. President Donald Trump has said he remains hopeful for a “fair trade deal,” but also admitted the meeting “may not happen.”
The escalation underscored the fragile state of U.S.–China relations, dampening risk appetite across global markets.
Hong Kong’s Hang Seng Index edged 0.2% lower, with the TECH sub-index sliding 0.8%, pressured by declines in major Chinese tech names.
Japan: Profit-Taking Follows Record Highs
Japanese equities led regional declines as investors booked profits after the Nikkei 225 reached record highs earlier this week. The broader TOPIX index slipped 0.5%.
Optimism had surged following the appointment of Prime Minister Sanae Takaichi, who is preparing a large-scale economic stimulus package expected to exceed last year’s ¥13.9 trillion plan. The package aims to curb inflation and bolster household spending, but analysts cautioned that recent gains may have run ahead of fundamentals.
South Korea: KOSPI Retreats After Record Peak
South Korea’s KOSPI reversed early gains to fall 1%, having briefly touched a record 3,895.09 points earlier in the session.
The Bank of Korea (BoK) kept its key interest rate unchanged at 2.5% for a third straight meeting but signaled a possible rate cut within three months. While the decision was expected, comments hinting at future easing spurred some risk-off moves.
Mixed Performance Elsewhere
Markets in Australia and Singapore were little changed, while India’s Nifty 50 rose 0.7%, diverging from the regional downtrend amid optimism over domestic economic resilience.
Looking Ahead: U.S. Inflation Data in Focus
Investors across Asia remained cautious ahead of U.S. Consumer Price Index (CPI) data due Friday, which will be key to shaping expectations for the Federal Reserve’s policy meeting next week.
Markets currently anticipate a rate cut, but uncertainty over trade tensions and the U.S. government shutdown continues to weigh on global risk sentiment, keeping Asian equities under pressure in the near term.
