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Asian stocks nudge higher ahead of Fed policy announcement

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U.S.-China trade talks end without major breakthroughs

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Investors await central bank decisions and corporate

earnings

(Updates markets, adds European earnings)

By Gregor Stuart Hunter

SINGAPORE, July 30 (Reuters) - Asian stocks struggled

for clear direction on Wednesday, with investors cautious after

trade talks between the U.S. and China ended without any

substantive agreement and ahead of the Federal Reserve's policy

announcement.

Early gains for MSCI's broadest index of Asia-Pacific shares

outside Japan petered out, leaving the index

trading flat in the afternoon as traders digested corporate

earnings results.

In early European trade, pan-region futures were up

0.15%, German DAX futures rose 0.31% and FTSE futures

were flat.

Australian shares closed up 0.7%, while Japan's

Nikkei stock index dipped 0.1% and Hong Kong's Hang Seng

Index skidded 1.3%.

The euro edged up from a one-month low, rising

0.1% to $1.1555, as markets weighed the EU's trade deal with the

Trump administration.

Traders are preparing for several central bank decisions,

key economic reports and corporate earnings during the next few

days, culminating in U.S. President Donald Trump's August 1

tariff deadline.

The Federal Reserve is expected to leave interest rates

unchanged at its policy meeting later on Wednesday, though it

could see rare dissent by some central bank officials in favour

of lower borrowing costs.

"With labour market conditions near full employment, most

Fed officials want to wait and see how tariffs impact

inflation," said Tom Kenny, senior international economist at

ANZ in Sydney.

Some officials are concerned that tariffs could drive higher

inflation expectations, leading to more persistent price

pressures rather than a one-off hit, he said on a podcast. "Our

expectation is that the Fed should be in a position to cut rates

at the September meeting."

U.S. Treasury bonds advanced ahead of the Fed's meeting,

pushing yields to the lowest in almost four weeks following a

strong auction of seven-year notes that quelled concerns about

diminishing demand for government debt.

The yield on benchmark 10-year Treasury notes

was last 4.328%, the lowest level since July 3. The two-year

yield, which rises with traders' expectations of

higher Fed fund rates, was little changed at 3.873%.

TARIFFS, CORPORATE EARNINGS

The Bank of Japan is expected to keep policy unchanged on

Thursday and the focus will be on its comments to gauge when the

next rate increase will come after a trade deal between Japan

and the U.S. cleared the way for the bank to resume rate hikes.

Ahead of Trump's deadline to reach a deal to avert

"Liberation Day" tariffs, some countries' talks with the U.S.

looked set to go down to the wire.

U.S. and Chinese officials agreed to seek an extension of

their 90-day tariff truce on Tuesday, though no major

breakthroughs were announced.

U.S. officials said it was up to Trump to decide whether to

extend a trade truce that expires on August 12 or potentially

let tariffs shoot back up to triple-digits.

India is also bracing for higher U.S. tariffs - likely

between 20% and 25% - on some exports as it holds off on fresh

trade concessions ahead of the August 1 deadline, two Indian

government sources said.

Meanwhile, three South Korean cabinet-level officials met

with U.S. Commerce Secretary Howard Lutnick in a last-ditch push

for a deal.

Oil prices rose as potential supply shortages came into

focus after Trump gave Moscow an abbreviated deadline toward

ending the war in Ukraine. Brent crude futures rose 14

cents, or 0.2%, to $72.40 a barrel.

Earnings were a mixed bag on Wednesday. UBS Group

reported profits that exceeded analysts' expectations, while

HSBC profits missed estimates as its losses from China

mounted, while German sportswear maker Adidas warned

of the impact to its earnings from U.S. tariffs.

U.S. tech megacaps Microsoft ( MSFT ) and Meta are

due to report earnings on Wednesday that will set the tone for

the rest of the week and the earnings season.

"It's been a solid U.S. reporting season so far, but these

megacap names need to run it hot and blow the lights out, given

the bar to please has been sufficiently raised," said Chris

Weston, head of research at Pepperstone.