Trump Tariffs Stir Market Waves, Bullish Outlook for A-Shares

Market Overview

Last Friday, markets displayed mixed movements under the influence of several key developments. Former U.S. President Donald Trump proposed higher tariffs on EU imports, coupled with speculation that tariffs across multiple industries may be raised before August 1. Additionally, improved U.S. consumer inflation expectations added to the complexity. As a result, U.S. equities were mixed. Tech stocks outperformed, helping the Nasdaq notch a modest gain and hit another intraday high. However, Netflix plunged over 5% following its earnings release.

Meanwhile, Fed Governor Christopher Waller expressed support for a July rate cut, driving the 2-year U.S. Treasury yield down by roughly 4 basis points at one point. In the crypto space, after Trump signed the Stablecoin Bill into law, Ethereum briefly topped $3,600, outperforming Bitcoin for the fourth consecutive week. Bitcoin, in contrast, retreated from recent highs.

In commodities, gold edged up 0.22%. Oil experienced a sharp intraday reversal, climbing nearly 2% before giving up all gains. In early Asian trading on Monday, U.S. stock futures and gold saw slight declines, while Bitcoin continued to trend lower.

Hot Topics to Watch

● Japanese Upper House Elections Begin

Support for Prime Minister Shigeru Ishiba‘s cabinet has fallen to a precarious 20.8%. JPMorgan believes that even if the ruling party loses its majority, Ishiba may choose to form a minority government instead of expanding the current coalition. Meanwhile, the rise of the far-right Sanseito party signals Japan’s political landscape is shifting further to the right.

Nomura warns that Ishiba may resign if his coalition loses majority control, potentially halting U.S.-Japan trade talks. Deutsche Bank describes the election as a referendum on Japans policy of “financial repression.” For Japanese equities, political uncertainty and stalled trade negotiations may dampen sentiment. On the flip side, expectations of fresh fiscal stimulus under a potential new government and a delayed rate hike by the Bank of Japan could provide market support. A postponed tightening path could also weaken the yen against the dollar, benefiting export-driven sectors while pressuring financial stocks.

● A-Shares Poised for Upside

Chinas A-share market is benefiting from two major sources of potential capital inflow. First, with domestic interest rates trending lower, household savings may shift toward equity investments. Second, as the dollar weakens and Fed rate cut expectations build, overseas funds may return to non-U.S. markets—particularly to A-shares.

Leverage-seeking investors have already started entering the market, as reflected in the rising margin financing balance, suggesting a gradual bull trend is taking shape. However, participation from retail and foreign institutional investors remains limited, though the pace of foreign capital outflow has slowed. If major political events—such as the Fourth Plenary Session or the upcoming 15th Five-Year Plan—deliver strong pro-growth signals, both pools of capital could accelerate their inflows, potentially fueling a significant upward move in A-share indexes.

Key Focus

22:00 GMT+8 – U.S. Conference Board Leading Economic Index (June, MoM)