(Sharecast News) - Asia-Pacific markets mostly fell on Wednesday following news of a preliminary trade agreement between the United States and Indonesia that includes a 19% tariff on Indonesian exports to the US.
The deal sparked mixed reactions across the region, with equities in Jakarta edging up while broader sentiment turned cautious.
"Asian markets declined as traders lowered their expectations for a Fed interest rate cut following US inflation data indicating that companies are starting to pass some tariff-related costs onto consumers," said TickMill market strategy partner Patrick Munnelly.
"The MSCI regional index dropped 0.1%, although Hong Kong technology stocks rose amid hopes that certain chip shipments to China will resume.
"Hong Kong's overall market index is on track for its highest closing level since February 2022."
Munnelly said traders were now pricing in lower chances that the Fed would implement more than one rate cut this year, with the likelihood of a September move just above 50%.
"While policymakers will likely need to maintain stable interest rates for a longer period to effectively manage inflation, they may have to consider cuts if inflation and labour markets weaken, as noted by Fed's Logan.
"Asian pharmaceutical stocks declined after Trump indicated that he may impose tariffs on pharmaceuticals by the end of the month, alongside levies on semiconductors, suggesting that these import duties could be combined with more extensive 'reciprocal' rates set to take effect on 1 August.
"Trump reignited speculation when asked about cost overruns tied to the refurbishment of the Fed's offices, remarking, 'I think it sort of is' a fireable offence."
Patrick Munnelly noted that, with the 30-year US Treasury yield hovering around the "critical 5% mark" and market-implied breakeven inflation rates climbing, markets had acknowledged the risk but remained vulnerable to heightened volatility should uncertainty over Powell's future intensify further.
Most markets fall as trade developments roll in
In Japan, the Nikkei 225 slipped 0.04% to close at 39,663.40.
Losses were led by Lasertec, which fell 4.96%, while Sumco and Shiseido declined 2.73% and 2.64% respectively.
The broader Topix index shed 0.21% in Tokyo, finishing the day at 2,819.40.
Mainland Chinese stocks also ended lower, with the Shanghai Composite down 0.04% at 3,503.78 and the Shenzhen Component falling 0.22% to 10,720.81.
Property and tech names were among the hardest hit.
Greenland Holdings dropped 10.09%, Guosheng Shian Technology slid 9.72%, and Beijing Jingyuntong Technology lost 9.46%.
Hong Kong's Hang Seng Index fell 0.29% to 24,517.76, weighed down by losses in consumer and auto-related names.
Shenzhou International Group declined 2.75%, Zhongsheng Group was off 2.67%, and China Resources Mixc Lifestyle fell 2.38%.
South Korea's Kospi 100 recorded one of the sharpest declines in the region, losing 0.82% to 3,219.18.
Financial stocks led the sell-off, with Mirae Asset Daewoo Securities down 7.1%, Woori Financial Group off 6.73%, and Industrial Bank of Korea down 5.91%.
Australia's S&P/ASX 200 fell 0.79% to 8,561.80.
St Barbara dropped 4.92%, Omni Bridgeway lost 3.53%, and National Australia Bank slid 3.38%, contributing to the benchmark's retreat.
New Zealand was the exception, with the S&P/NZX 50 rising 0.51% to 12,754.59.
Gains were led by Infratil, which rose 3.51%, followed by Vista Group International up 2.5% and Mainfreight adding 2.33%.
In currency markets, the dollar slipped 0.04% on the yen to trade at JPY 148.82, as it fell 0.12% against the Aussie to AUD 1.5333, while it gained 0.07% on the Kiwi, changing hands at NZD 1.6829.
Oil prices also eased, with Brent crude futures last down 0.25% on ICE at $68.54 per barrel, and the NYMEX quote for West Texas Intermediate off 0.17% at $66.41.
Korean unemployment rate eases, Trump claims to have struck Indonesia deal
In economic news, South Korea's labour market showed continued resilience in June, with the seasonally adjusted unemployment rate easing to 2.6%, down from 2.7% in May.
The number of unemployed people fell to 825,000, a decrease of 32,000 or 3.8% compared to the same month last year.
Employment rose by 183,000 to 29.091 million, marking a 0.6% year-on-year increase.
The labour force participation rate ticked up to 65.4%, up 0.1 percentage points from a year earlier, reflecting steady engagement despite global economic uncertainty.
Meanwhile, US president Donald Trump announced a preliminary trade deal with Indonesia that includes a 19% tariff on Indonesian exports to the United States.
Speaking outside the White House, Trump claimed, "We will pay no tariffs. So they are giving us access into [sic] Indonesia, which we never had. That's probably the biggest part of the deal. And the other part is they are going to pay 19%."
Trump's rhetoric did not reflect reality, as tariffs are not paid by the exporting country, but by the importer - in this case, the United States.
The details of the agreement remained unclear, with no official confirmation from Jakarta.
Indonesian president Prabowo Subianto acknowledged a "very good call" with Trump and described the development as the start of a new era in bilateral trade.
In a social media post, Prabowo said the two sides had agreed to deepen economic ties, but he did not confirm any specific tariff arrangements.
Reporting by Josh White for Sharecast.com.
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