Asia Edges Higher as Wall Street Optimism Meets a Fragile Macro Backdrop

Tokyo led regional sentiment as exporters caught a tail-wind from a dollar that eased to ¥156.20 on expectations U.S. labour-market slack will finally check Treasury yields. Dealers note that every 1-yen move now adds roughly ¥35 billion to Toyota’s full-year earnings, underscoring why even marginal dollar weakness can push the Nikkei toward its March highs. Conversely, Shanghai’s Composite lagged, capped by property-sector downgrades notwithstanding Beijing’s latest 10-basis-point liquidity injection.

The rally rests on a precarious equilibrium. Futures markets are pricing a 64 percent probability that the Fed will lower its target range to 4.75-5 percent on 30 July, yet the same swaps strip in fewer than 35 basis-points of easing beyond December - a recognition that sticky U.S. core PCE inflation at 2.9 percent limits policy space. Any upside surprise in Friday’s non-farm payrolls could unwind the dollar slide that Asia so craves, particularly for South Korean chipmakers whose margins are squeezed by imported energy costs.

Meanwhile, oil’s tumble to $71 a barrel after OPEC+ signalled faster supply normalisation adds a disinflationary kicker for net-importing economies but unnerves sovereign funds in the Gulf that have become major buyers of Asian equity blocks. That dynamic explains why ASEAN indices traded flat despite bargain-hunting in tech. Investors are thus tip-toeing: willing to chase Wall Street’s momentum, but acutely aware the next macro headline - be it U.S. jobs, Chinese credit data, or geopolitical flare-ups - could flip risk appetite as quickly as it returned.