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Asian stocks fall on weak China data and yen firms following BOJ decision

Asian stocks fell on Thursday due to weaker than expected Chinese data and a drop in copper prices. The yen, however, firmed up after the Bank of Japan increased its inflation forecast and kept rates unchanged.

The revised forecast indicated cautious optimism that Japan’s trade agreement with the U.S. will help the economy avoid a sharp downturn, and set the BOJ's interest rate hike later in the year.

The yen rose 0.6% to 148.62 dollars per yen immediately after the central banks unanimously maintained short-term rates at 0.5%.

The Japanese stock market showed no reaction to this decision, with the last 0.9% increase.

Investors also digested a trade agreement between the U.S.A. and South Korea as well as a Federal Reserve's decision to keep rates unchanged and strong earnings by megacap tech companies.

Nasdaq Futures soared by 1.2% following better-than expected earnings from Microsoft Meta Platforms. S&P futures rose 0.8% while the U.S. Dollar held steady following a two-month peak.

Tony Sycamore is a market analyst with IG in Sydney. He said that both tech companies have reported "lightning fast" earnings, reporting increased revenue from cloud computing, and artificial intelligence enabled ad targeting, respectively.

The broadest MSCI index of Asia-Pacific stocks outside Japan fell by 0.7% but was still on course for its fourth consecutive month gain in July.

Hong Kong and China stocks led the declines following official PMI gauges showing weaker than expected economic activity in July.

The Federal Reserve’s rate-setting panel voted on Wednesday 9-2 to keep interest rates unchanged for the fifth meeting in a row. Two Fed governors dissented for the first time since more than 30 years.

The comments made by Fed chair Jerome Powell after the decision undermined confidence that borrowing rates would start to drop in September.

The dollar index stood at 98.812, which was just a little below the two-month peak of 99.987 that it reached on Wednesday. The index will clock its first gain in 2025, a 3.1% increase for the month.

"Despite the Federal Reserve's recent decision to hold rates at the same level, there is still a chance that they will cut them at future meetings as they weigh the softening of economic data against the possibility of persistent inflation," Manusha Samanthaweera, Fixed Income Investment Director at Capital Group, said.

The U.S. Gross Domestic Product growth was higher than expected during the second quarter. However, the report's details painted a picture that showed an economy in decline and plagued with uncertainty due to President Donald Trump’s protectionist policies.

The Korean won increased by 0.3% following Trump's announcement that the U.S. would charge a 15 percent tariff on South Korean imports in exchange for South Korea investing $350 billion into U.S. projects, and purchasing $100 billion of U.S. Energy Products.

The announcement is part of a series of deals on trade policy that were rushed to be announced before the August 1 deadline in order to avoid the imposition April 2 "Liberation Day' tariffs.

Trump's tariff campaign cast a shadow over global markets. Negotiations on trade with India are still underway after Trump announced earlier that the U.S. would impose a 25 percent tariff on goods imported to the country.

Copper futures fell 19% in the meantime after Trump announced that the U.S. would impose a tariff of 50% on copper pipes, wiring and other copper products. However, the details of this levy were not as comprehensive as expected, and did not include copper input materials like ores, concentrates, and cathodes.

Brent crude futures, due to expire Thursday, were down by 0.19%, at $73.1 per barrel. U.S. West Texas intermediate crude, for September, was unchanged at $70.01 per barrel.

The Brent October contract, the more active one, eased by 0.14% at $72.37 per barrel. (Reporting and editing by Tom Hogue, Jamie Freed and Ankur Banerjee. Additional reporting by Gregor Stuart Hunter.

(source: Reuters)