Asian markets witnessed a modest but significant rise in equity prices, and US stock futures reversed losses after China's Ministry of Commerce confirmed it is evaluating the possibility of re-engaging in trade talks with the United States. This development lifted investor sentiment, encouraging hopes of a thaw in the prolonged US-China trade dispute.

The MSCI Asia Pacific Index gained 0.4%, as market players reacted to China's willingness to possibly reinitiate dialogue following repeated messages from US officials. Japan’s stock market, in particular, was a standout, with Japanese shares climbing 1.2%, boosted further by optimistic statements from the nation’s chief trade negotiator.

Short Covering and Market Momentum Picks Up

Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd., referred to China’s openness as a "great move", emphasizing that such a step will likely trigger a round of short covering. Investors are seizing the opportunity for gains while trade-related uncertainties ease.

The S&P 500 index, which had already shown a strong upward trend, notched its eighth consecutive day of gains, its longest winning streak since August. The index rose 0.6% in futures trading following the news, as sentiment grew increasingly optimistic that tariff pressures might subside.

US Economic Data and Corporate Earnings in Focus

While China’s statement brought relief, investors’ attention quickly turned toward the US jobs report due Friday. This report is expected to be the last significant economic indicator for the week, capable of influencing monetary policy expectations and investor positioning.

In terms of earnings, tech heavyweights Apple and Amazon posted results that disappointed markets. Apple’s sales in China declined more than anticipated, dampening what was otherwise a solid earnings report. Amazon’s forecast for operating income fell short of expectations, pulling down its stock in after-hours trading.

However, the mood was not entirely grim in the tech sector. Microsoft and Meta Platforms saw their shares surge on the back of upbeat earnings, helping maintain overall positive sentiment in US equities.

Additionally, a report indicating the US may ease restrictions on Nvidia’s sales to the UAE drove Nvidia shares higher, providing further support to the technology segment.

China Evaluating Trade Talks: Key Political Signal

The Chinese Commerce Ministry stated that it had received signals from the US—via third-party intermediaries—that Washington is keen to resume negotiations. According to their official comment, “The US has recently sent messages to China through relevant parties, hoping to start talks with China. China is currently evaluating this.”

This statement hints at a potential breakthrough, even as President Trump maintains that President Xi must initiate contact to begin any formal discussion. The remarks show that both sides are gauging each other's willingness to ease tensions, although no timeline for talks has been established.

Japan Eyes Strategic Leverage in US Treasury Holdings

In a notable development from Japan, Finance Minister Katsunobu Kato suggested that the country's US Treasury holdings could become a bargaining chip in its trade talks with the US. Speaking during a TV Tokyo program, he said that although Japan doesn’t intend to sell the holdings, the very option of holding or selling them represents a “card” in trade negotiations.

This indicates that Japan may leverage its position as a significant holder of US debt to strengthen its hand in talks with Washington, especially as economic diplomacy takes center stage amid broader geopolitical realignments.

Currency and Commodity Movements Mirror Risk Sentiment

The yen weakened against the US dollar, following comments from the Bank of Japan, which stated it would take longer to reach its inflation target than previously expected. This led to speculation that interest rate hikes might be delayed, weakening the yen further.

On the commodities front, oil and gold pared early losses, aligning with a global risk-on mood. As financial markets became more hopeful of resolution in the trade standoff, safe-haven assets such as gold saw reduced demand, while cyclical sectors gained traction.

Looking Ahead: Market Watchers Await Clearer Direction

While optimism is returning, many analysts caution against premature celebration. The path to actual negotiations between China and the US remains uncertain, and past experiences suggest that trade diplomacy can often be slow and nonlinear.

Nevertheless, with key macroeconomic indicators, corporate earnings, and geopolitical gestures aligning positively, the outlook for global equities has turned less bearish.

Conclusion: A Tentative Turn in Global Markets

The combination of easing trade tensions, positive corporate earnings (excluding select big tech firms), and upbeat investor sentiment has led to a rebound in global markets, particularly in Asia.

China’s willingness to engage, Japan’s strategic economic signalling, and a resilient performance by key US indices all suggest that while challenges remain, markets are recalibrating with a more hopeful tone.

The Upcoming IPOs in this week and coming weeks are Wagons Learning, Srigee DLM, Manoj Jewellers.

The Current active IPO are Kenrik Industries, Arunaya Organics.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.