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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 reflected cautious optimism, indicating that Japan's deal with the U.S. could help to avert an economic downturn. It also set the BOJ in a position to raise interest rates later this year. Governor Ueda is scheduled to speak with the media at 0630GMT.

The yen rose 0.4% to 148.62 dollars per yen immediately after the central banks unanimously maintained short-term rates at 0.5%.

David Chao is the global market strategist at Invesco for Asia-Pacific.

The announcement made today increases the likelihood of a rate increase earlier than anticipated. We could see a rise in rates as early as October.

The decision had little impact on the Japanese stock market, which was last up by 0.9%. Japan's short-dated bonds have pared their losses since the Bank of Japan statement caused market participants push back expectations of any future interest rate increases.

Investors also digested a trade agreement between the U.S., South Korea and a Federal Reserve's decision to keep rates unchanged, as well as strong earnings from tech megacap firms. The Korean won increased by 0.3% following the announcement that U.S. president Donald Trump would impose a 15% tariff on South Korean imports. In return, South Korea will invest $350 billion into U.S. projects as well as purchase $100 billion of U.S. Energy Products.

The announcement is part of a series of deals on trade policy rushed to be announced before the August 1 deadline in order to avoid the impositions of "Liberation Day", April 2, tariffs. Malaysian Prime Minster Anwar Ibrahim announced Thursday that, after a phone call with Trump, the tariff rate for Malaysian goods will be announced on Friday. The Malaysian Ringgit fell by 0.2%. The Thai baht remained stable after Thailand's Finance minister said that the country expected to receive information about the U.S. Tariff rate within 24 hour. 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. will impose a 25 percent tariff on goods imported to the country. Indian stocks fell 0.4%. Copper futures fell 19.4% as Trump announced that the U.S. would impose a tariff of 50% on copper pipes and wires, which was less than the expectations of broad restrictions. Nasdaq Futures soared by 1.3% following better-than expected earnings from Microsoft, Meta Platforms and other companies. S&P futures rose 0.8% while European futures rose 0.17%.

The MSCI index for Asia-Pacific stocks outside Japan, which is the broadest measure of Asia-Pacific stock prices, fell by 0.7% in July. However it still remained on course to achieve its fourth consecutive month-to-month gain. Hong Kong and China stocks led the declines following official PMI gauges showing weaker than expected economic activity in July. On Wednesday, the Federal Reserve's interest rate-setting panel voted by 9-2 to keep rates unchanged for the fifth time in a row. Two Fed governors dissented for the first times in over 30 years. Fed Chair Jerome Powell’s comments following the decision undermined confidence that borrowing rates would start to drop in September.

The dollar index stood at 98.812, just below the two-month peak of 99.987 that was reached on Wednesday. The index will record its first monthly gain since 2025, a 3.1% increase. The Federal Reserve may decide to cut rates at future meetings, despite the fact that they decided to maintain the current rate at their recent rate setting meeting. This is because of the possibility of persistent inflation and the softening economy data. The U.S. Gross Domestic Product growth was higher than expected in second quarter. However, the report's details painted a picture that the economy is losing momentum and is plagued with uncertainty due to Trump's protectionist policies. 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 a barrel. (Reporting and editing by Tom Hogue, Jamie Freed, Ankur Banerjee. Additional reporting by Gregor Stuart Hunter.

(source: Reuters)