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Asian shares cheer Trump announcement of Japan trade deal

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U.S.-China officials to discuss trade deal extension in

Stockholm

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Wall Street mixed as tariffs impact corporate earnings

(Adds China open, European stock futures)

By Stella Qiu

SYDNEY, July 23 (Reuters) - A rally in Japanese shares

led Asian markets on Wednesday after President Donald Trump

announced a trade deal with Japan and fuelled hopes of more to

come, tempering the disappointment from U.S. earnings that

highlighted the drag from higher tariffs.

Trump late on Tuesday said a trade deal with Tokyo will

include Japan paying a lower 15% tariff on shipments to the U.S.

It followed an agreement with the Philippines that will see the

U.S. collect a 19% tariff rate on imports from there.

"Expectations for a breakthrough were low, so Trump's

announcement delivers a mild upside surprise - providing

near-term relief for Japanese equities," said Charu Chanana,

chief investment strategist at Saxo.

"Strategically, the deal allows Japan to sidestep immediate

tariff escalation, while Trump's attention shifts elsewhere."

Japan's Nikkei jumped 2.6% on Wednesday as shares of

automakers surged on news the deal lowers the auto tariff to

15%, from a proposed 25%. Mazda Motor ( MZDAF ) rallied 17% while

Toyota Motor ( TM ) jumped 11%.

Japanese government bonds slid, with the yields for 10-year

JGBs up a whopping 8.5 bps at 1.585%, as the

reduced uncertainty helped to clear the path for the Bank of

Japan to resume interest rate hikes.

The reaction in the yen was more muted, eking out a small

0.1% gain to 146.42 per dollar. Traders are on edge as

Japanese Prime Minister Shigeru Ishiba was planning to soon

decide whether to step down after assessing the outcome of the

trade deal, Yomiuri newspaper said.

Trump also said representatives from the European Union are

coming for trade negotiations on Wednesday.

That stirred hopes for a deal with Europe, as markets were

worried about broader EU countermeasures amid receding signs of

a trade agreement with Washington.

EUROSTOXX 50 futures rose 0.8%, while Wall Street

futures were up about 0.1%.

In another positive development, U.S. and Chinese officials

will meet in Stockholm next week to discuss an extension to the

August 12 deadline for negotiating a trade deal, Treasury

Secretary Scott Bessent said.

Chinese blue-chips edged up 0.3% and Hong Kong's

Hang Seng index gained 0.5%. MSCI's broadest index of

Asia-Pacific shares outside Japan advanced 0.6%.

Overnight, Wall Street closed mixed as investors assessed a

spate of earnings that pointed to signs that Trump's trade war

is hitting corporate profit margins. General Motors ( GM )

tumbled 8.1% after the automaker reported a $1 billion hit from

tariffs to its quarterly results.

Shares of RTX dropped 1.6% after the aerospace and

defense giant took a hit from tariffs despite strong demand for

its engines and aftermarket services.

Investors are now waiting for results from Tesla

and Google's parent Alphabet - the Magnificent 7

stocks that have driven much of the market rally fuelled by AI

optimism.

In the foreign exchange market, moves are a little muted

with the dollar holding onto overnight losses along with lower

Treasury yields. The dollar index was flat at 97.45,

having slipped 0.4% overnight for its third straight day of

declines.

The euro dipped 0.1% to $1.1739 after rising 0.5%

overnight.

Benchmark 10-year U.S. Treasury yields ticked up

2 basis points to 4.3559%, after slipping 3 bps overnight, as

Trump continued to lash out at Federal Reserve Chair Jerome

Powell for not cutting interest rates, although Bessent said

there was no need for him to step down immediately.

Bessent did say the Fed's vital independence on monetary

policy is threatened by its "mandate creep" into non-policy

areas and he called on the U.S. central bank to conduct an

exhaustive review of those operations.

Oil prices gained a little on Wednesday. U.S. crude

rose 0.4% to $65.60 per barrel, while Brent was at

$68.88 per barrel, up 0.4%.

Spot gold prices were steady at $3,429 an ounce.