Asian markets mostly rose Tuesday but gains were limited with investors treading uneasily as they await the conclusion of a crucial Federal Reserve meeting this week.
While geopolitical tensions and the China-US trade war continue to make waves, the key focus for now is what the US central bank plans to do with monetary policy as the tariffs stand-off shows signs of impacting the world's top economy.
The latest weak data saw manufacturing activity in New York state plunge into contraction this month and hit its lowest level since late 2016, reflecting steep drop-offs in new orders, order backlogs and employment.
Observers pointed out the reading coincided with Trump's threat to impose tariffs on Mexico over immigration policy, which he has since withdrawn, but added that the reaction suggests how manufacturers would react to further action against China.
There has been increasing talk that the Fed will cut borrowing costs for the first time in more than a decade, though the expectation is for a move later on.
The shift to a more dovish tone from the bank has been a key support for global markets in the face of the trade uncertainty.
Still, Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management, warned: "If market expectations for cuts are not met, we could see a jump in market volatility.
"Unless US-China trade talks completely derail, we expect a first Fed rate cut to come no earlier than September, in contrast to what markets have priced in."
"Uncertainty on the trade front remains high and markets will remain undecided until we see the events at the G20 summit in Japan unfold."
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