Asia report: Markets mixed on OPEC increase, trade concerns
By Josh White
Date: Monday 04 Aug 2025
(Sharecast News) - Asia-Pacific equity markets delivered a mixed performance on Monday as investors reacted to fresh US tariffs, a weaker-than-expected American jobs report, and the latest oil supply decision from OPEC+.
Wall Street's decline on Friday and renewed expectations of a US Federal Reserve rate cut next month influenced sentiment across the region, while oil prices edged lower after OPEC+ announced a substantial output increase.
"Asian stock markets declined on Monday, mirroring Wall Street's downturn as concerns about the US economy surged again," said TickMill market strategy partner Patrick Munnelly.
"This led investors to anticipate a nearly guaranteed interest rate reduction in September, putting pressure on the dollar.
"Early trading indicated that Fed fund futures had priced in 65 basis points of interest rate cuts by December, though this expectation has now decreased to 60 basis points."
Munnelly noted that the current level marked a "significant difference" from the 33 basis points anticipated prior to Friday's disappointing US payroll report, adding that there was still an 83% chance for a rate cut in September.
"In reality, the 25 basis point decrease in two-year yields on Friday effectively represented the market preemptively enacting a Fed rate cut, as US borrowing costs are influenced more by yields than the Fed funds rate.
"Additionally, 10-year yields also dropped sharply by 14 basis points but faced resistance near the 4.20% mark, a level they have consistently struggled to surpass since last October."
Markets mixed as investors watch energy markets, trade developments
In Japan, equities declined sharply, with the Nikkei 225 falling 1.22% to 40,300.50 and the Topix down 1.1% at 2,916.20.
Losses were led by Yamaha, which tumbled 8%, while Credit Saison and Recruit Holdings dropped 6.59% and 5.62%, respectively.
The yen also weakened against the dollar, with the greenback last up 0.24% to trade at JPY 147.76.
China's markets ended higher, buoyed by gains in technology and industrial stocks.
The Shanghai Composite added 0.66% to close at 3,583.31, while the Shenzhen Component rose 0.46% to 11,041.56.
Harbin Xinguang Optic Electronics surged 13.54% in Shanghai, with Fujian Furi Electronics and Lanzhou Greatwall Electrical both gaining over 10%.
Hong Kong's Hang Seng Index advanced 0.92% to 24,733.45, driven by strong performances from New Oriental Education, up 6.49%, Zhongsheng Group, which climbed 5.59%, and Lenovo, up 4.95%.
In South Korea, the Kospi 100 gained 0.94% to 3,178.67.
Notable risers included KT&G, up 5.42%, Samsung Electro-Mechanics, which added 4.88%, and Doosan Enerbility, which rose 4.72%.
Australian shares were largely flat, with the S&P/ASX 200 edging up just 0.02% to 8,663.70.
Mining stocks provided support, with St Barbara gaining 7.69%, Northern Star Resources up 5.62%, and Ramelius Resources advancing 4.44%.
In contrast, New Zealand's S&P/NZX 50 slipped 0.36% to 12,684.04.
KMD Brands fell 4.08%, while Pacific Edge and Sanford declined 2.88% and 2.86%, respectively.
The New Zealand dollar was little changed against its American counterpart at NZD 1.6902, while the Aussie strengthened slightly, with the USD down 0.16% to change hands at AUD 1.5423.
Oil prices meanwhile declined after OPEC+ announced an increase in production for September.
Brent crude futures were last down 1.15% on ICE at $68.87 per barrel, while the NYMEX quote for West Texas Intermediate dropped 1.22% to $66.51.
OPEC confirmed September production increase, Australian inflation expectations rise
At the top of the regional agenda was OPEC+ confirming a significant production increase for September, intensifying concerns about oversupply.
The group of oil producers agreed to boost output by 547,000 barrels per day next month, marking the latest in a series of accelerated hikes aimed at reclaiming market share amid worries about supply disruptions related to Russia.
It effectively reversed OPEC+'s largest previous output cuts and included an additional increase for the United Arab Emirates.
In total, the changes would amount to 2.5 million barrels per day, roughly 2.4% of global demand.
OPEC+ justified its decision by citing a healthy global economy and low stock levels.
The move followed renewed pressure from Washington on India to curtail Russian oil purchases, part of US president Donald Trump's push to bring Russia to the negotiating table for a peace agreement with Ukraine by 8 August.
In Australia, government bond yields rose as inflation data triggered a shift in monetary policy expectations.
The yield on 10-year bonds climbed to around 4.25% after briefly touching a four-week low.
That followed the TD Securities-Melbourne Institute inflation gauge surging 0.9% in July, the sharpest monthly rise since December 2023, reinforcing concerns about persistent inflationary pressures.
The RBA expected core inflation to remain within the upper half of its 2% to 3% target range through late 2025, while headline inflation was forecast to reach the top of the band by the end of the year and remain elevated into 2026 as energy subsidies were withdrawn.
Governor Michele Bullock warned of global risks, including weak external demand and the potential for imported inflation, which could disrupt Australia's trade-reliant economy.
Trade tensions eased slightly after the United States left its 10% baseline tariff on Australian goods unchanged.
Reporting by Josh White for Sharecast.com.
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