Asian markets mostly fall as investors mull trade war, potential rate cut by Fed

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Asian markets mostly retreated in cautious trading Tuesday, as global trade tensions continued and suggestions of a Federal Reserve interest-rate cut percolated.

Mexico sent officials to Washington on Monday to discuss potential U.S. tariffs and migration, and warned that the escalating tariffs that President Donald Trump has threatened would hurt the economies of both countries. Meanwhile, U.S. officials said China has not been telling the truth about why trade talks broke down, and blamed China for backtracking on promises that had been made.

St. Louis Fed President James Bullard said Monday that interest rates may have to be cut soon because of low inflation and the trade war’s threat to the economy. Some forecasters now expect as many as two rate cuts by the end of the year.

Wall Street was mixed, with the Dow Jones Industrial Average closing up slightly, while the S&P 500 and Nasdaq Composite fell.

Japan’s Nikkei finished flat, while Hong Kong’s Hang Seng Index fell 0.5%. The Shanghai Composite closed down 0.9%and the smaller-cap Shenzhen Composite sank 1.4%. South Korea’s Kospi was about flat, while stocks rose 0.5% in Singapore and fell 0.7% in Taiwan .

Australia’s S&P/ASX 200 finished 0.2% higher after the Reserve Bank of Australia cut its benchmark interest rate by a quarter of a percentage point to 1.25%, becoming the largest developed economy to cut interest rates in 2019.

It was the first cut in borrowing costs in nearly three years for the bank, and Gov. Philip Lowe said the risks from trade disputes have increased.

The move comes as market participants grow more convinced that the Federal Reserve will likely to cut rates later this year and follows a string of reductions by neighboring Asia-Pacific nations.