Asia Markets Rally as Wall Street Rebounds, RBI Policy in Spotlight

Asian equities advanced on Tuesday, buoyed by a strong recovery on Wall Street after a weak U.S. jobs report sparked expectations for future rate cuts by the Federal Reserve. However, markets remained cautiously positioned amid lingering global trade uncertainties.

U.S. Labor Weakness Fuels Risk-On Sentiment

Wall Street surged on Monday as investors reacted to disappointing nonfarm payroll data, which showed July U.S. job growth at just 73,000—far below forecasts—with downward revisions to previous months. The unemployment rate rose to 4.2%, reinforcing fears of slowing economic momentum 

This weak labor report lifted the probability of a September Fed rate cut to over 90%, underpinned by the expectation of nearly a full percentage point of easing by year-end. Treasury yields plunged, and the dollar weakened, reviving investor appetite for equities and Asian markets.

Regional Markets Climb, Led by South Korea and Australia

Asian stock markets broadly rose, tracking U.S. sentiment:

• South Korea’s KOSPI led gains with a 1.6% jump

• Australia’s ASX 200 rose over 1%

• Japan’s Nikkei 225 gained around 0.6%–0.7%

• China’s Shanghai Composite rose approximately 0.5%, while the CSI 300 edged up 0.3%

• Hong Kong’s Hang Seng fell about 0.2%, bucking the broader uptrend

• Singapore’s STI climbed roughly 0.5% 

RBI Decision Looms Amid Trade Uncertainty

Investor focus is now shifting to the Reserve Bank of India, which is holding its policy meeting through Wednesday, with a rate decision expected on August 6. The bank is widely expected to keep the policy rate at 5.50%, having already enacted a 0.5% rate cut in June.

While CPI inflation has started to slow, India’s strong growth in Q1 and global trade risks—particularly U.S. tariff threats tied to Russian oil—may prompt the RBI to pause further easing. Analysts at ING project the next rate cut may come in Q4.

Trade Tariffs Cast a Shadow on Sentiment

President Trump’s renewed warnings of tariffs on Indian imports added fresh uncertainty, compounding broader geopolitical risks. While the U.S. also announced tariff plans targeting other regions like South Korea, markets remain sensitive to any protectionist escalation.

Market Implications and Outlook

Investors welcomed the soft U.S. labor data as supportive of further Fed rate cuts, which drove equity gains and diminished safe-haven demand. However, trade tensions and policy uncertainty—both in India and globally—continue to temper sentiment. Markets await clarity from both central bank decisions and geopolitical developments that could shape trajectory amid a volatile backdrop.