(Sharecast News) - Asia-Pacific equities fell on Tuesday as investors reacted to US president Donald Trump's threats of sweeping new tariffs and his dismissal of Federal Reserve governor Lisa Cook, moves that heightened trade and policy uncertainty across the region.
Patrick Munnelly, market strategy partner at TickMill, said: "Asian stocks dipped ... and equity-index futures for the US and Europe also declined.
"The Treasury curve steepened, with a decrease in two-year yields indicating mounting speculation about a potential Fed interest-rate cut as early as next month, while 30-year yields rose due to worries that a more lenient monetary policy could fuel inflation."
Markets fall across the Asia-Pacific region
In Tokyo, the Nikkei 225 dropped 1.1% to 42,338.00, with losses led by Nissan Motor, down 6.25%, Tokyo Electric Power, off 5.48%, and TOTO, which fell 3.57%.
The broader Topix index declined 1.08% to 3,071.99.
Chinese equities were mixed - the Shanghai Composite slipped 0.39% to 3,868.38, weighed by sharp losses in Shanghai Baosight Software, down 10.04%, Beijing Tricolor Technology, off 10%, and Shanghai Sanmao Enterprise Group, which fell 9.81%.
In contrast, the Shenzhen Component gained 0.26% to 12,473.17.
Hong Kong stocks led regional losses, with the Hang Seng Index falling 1.18% to 25,524.92.
CSPC Pharmaceutical Group slid 4.33%, China Unicom Hong Kong fell 3.46%, and New Oriental Education and Technology lost 2.87%.
South Korea's Kospi 100 retreated 1.08% to 3,216.48, dragged lower by Hanwha Ocean, down 6.18%, HD Korea Shipbuilding & Offshore Engineering, off 5.71%, and KakaoPay, which fell 4.73%.
In Australia, the S&P/ASX 200 shed 0.41% to 8,935.60 as Reece dropped 7.4%, Deterra Royalties fell 6.62%, and Abacus SK lost 5.83%.
New Zealand's S&P/NZX 50 declined 0.93% to 12,957.98, with Pacific Edge down 5.59%, KMD Brands off 4.08%, and Meridian Energy falling 3.54%.
Munnelly added that Trump's actions had "contributed to a negative outlook on US assets, following his tariff policies and increasing deficit, which earlier this year sparked a 'Sell America' sentiment and led Wall Street to question the concept of US exceptionalism.
"Traders have begun looking for alternatives to the dollar and Treasuries, and any perceived loss of Fed independence might hasten this trend."
In currency markets, the dollar slipped 0.14% against the yen to trade at JPY 147.60, was flat on the Aussie at AUD 1.5427, and gained 0.07% on the Kiwi to change hands at NZD 1.7112.
"The dollar recovered most of its declines after Federal Reserve governor Lisa Cook announced she would not resign following president Donald Trump's attempt to remove her," said Munnelly.
"The dollar's value fell by as much as 0.3%, while gold prices increased by as much as 0.6% after Trump declared on his Truth Social account that Cook would be dismissed immediately.
"However, the dollar later regained some strength, and gold's gains were reduced after Cook affirmed her intention to remain in position."
Oil prices weakened, with Brent crude futures last down 1.19% on ICE at $67.98 per barrel, and the NYMEX quote for West Texas Intermediate falling 1.36% to $63.92.
RBA minutes hint at further cuts, Korean consumer confidence rises
In economic news, minutes of the Reserve Bank of Australia's 11-12 August meeting showed the board expects to lower the cash rate beyond its recent reduction to 3.6%, the lowest since April 2023.
Policymakers agreed that achieving full employment while returning inflation to the midpoint of the 2-3% target range would likely "require some further reduction in the cash rate over the coming year," with the pace of easing to be decided "on a meeting-by-meeting basis" as new data emerge.
Unemployment remained low at 4.2%, while growth in the June quarter was supported by household consumption and trade.
Economists expected two more reductions by March 2026, taking the rate to 3.1%, after which the RBA is forecast to pause.
The bank's deliberations came as global central banks, including the Federal Reserve, European Central Bank, Bank of England and Bank of Canada, had shifted toward easing amid signs of slowing growth and as policymakers assessed the inflationary impact of higher US tariffs.
In South Korea, consumer confidence rose for a fifth consecutive month in August, reaching 111.4, its highest level since January 2018.
The Bank of Korea reported that surging equities, resilient exports and expectations of US rate cuts had bolstered sentiment despite lingering trade uncertainty.
Exports grew for a second straight month in July, led by semiconductors and vehicles, while the Kospi Index hit a four-year high late last month.
The housing price expectations index climbed to 111, raising concerns about household debt as the central bank prepares to set policy on Thursday.
Most economists expected rates to be left unchanged for a third month as officials balance growth risks with property market imbalances.
"Today's data calendar is sparse. Meanwhile, the markets are focused on Nvidia's quarterly earnings report set for Wednesday, which is a crucial assessment of the booming artificial intelligence sector," Munnelly noted.
Reporting by Josh White for Sharecast.com.
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