GLOBAL MARKETS-Asia stocks sink as Trump and Xi make a deal, BOJ holds

Asian stocks veered between gains and losses on Thursday after U.S. President Donald Trump said he had made a deal with Chinese President Xi Jinping on rare earths and tariffs, while the yen weakened after the Bank of Japan kept interest rates on hold. After a near two-hour meeting with Xi, Trump said he had agreed to reduce tariffs on imports from China in exchange for Beijing resuming U.S. soybean purchases, keeping rare earths exports flowing and cracking down on the illicit trade of fentanyl.

But the immediate market reaction was choppy with traders trying to make sense of the information released so far and awaiting further details. China has yet to comment. MSCI's broadest index of Asia-Pacific shares outside Japan reversed an earlier increase of as much as 0.5% to last trade down 0.5%, while U.S. S&P 500 e-mini futures moved 0.1% lower as previous gains petered out.

"At the moment, the price action makes things seem like a lot of this was already priced in," said Kyle Rodda, senior market analyst at Capital.com in Melbourne. "Arguably the markets were hoping for the complete removal of the fentanyl tariff, so that could explain the ambivalence in the markets." Global markets are also in the midst of a string of central bank decisions that will give clues about the path ahead for interest rates.

Though the Bank of Japan stood pat on rates as expected, it repeated its pledge to continue increasing borrowing costs if the economy moves in line with its projections. The Nikkei 225 was last down 0.4% after the Bank of Japan's decision. The yen reversed earlier gains against the U.S. dollar and was last flat at 152.77 yen.

"The BOJ is tip-toeing towards a hike," said Fred Neumann, chief Asia economist at HSBC in Hong Kong. "With October a missed opportunity to nudge rates higher, all eyes are now on December, when a rate hike appears likely." The Federal Reserve cut interest rates on Wednesday by a quarter of a percentage point as expected, but the U.S. central bank's new policy statement included several references to the lack of official data during the ongoing federal government shutdown, and Fed Chair Jerome Powell told reporters later that policymakers are likely to become more cautious if it deprives them of further job and inflation reports.

Those comments prompted traders to slash their forecasts for a 25-basis-point rate cut from the U.S. central bank in December, which had been viewed as a near-certainty earlier. Fed funds futures now imply a 67.8% probability that the Fed will hold rates at its next meeting on December 10, compared with a 9.1% chance on Wednesday, according to the CME Group's FedWatch tool. The yield on the U.S. 10-year Treasury bond was last around a three-week high of 4.066%, up 0.8 basis point compared with a previous close of 4.058%.

The dollar index, which measures the greenback's strength against a basket of six currencies, edged back from a two-week high, down 0.2% at 98.98. Gold was last up 0.8% at $3,960 per ounce. The euro was last 0.3% firmer at $1.1628 ahead of a policy decision by the European Central Bank later in the day at which it is expected to leave rates on hold for a third meeting in a row.

Elsewhere, the KOSPI index overturned a gain of as much as 1.6% after Trump and South Korean President Lee Jae Myung finalised details of a trade deal, and was last trading 0.2% lower. Shares in Samsung Electronics surged 3.4% after it reported on Thursday a 32% rise in third-quarter operating profit.

Corporate earnings season is fuelling fresh anxiety among investors over the cost of the AI buildout, even as the U.S. economy appears to remain in rude health, putting pressure on tech megacap stocks that account for the biggest weighting in the S&P 500 Index. Meta on Wednesday forecast "notably larger" capital expenses next year as its revenues beat market estimates, while Microsoft's spending on artificial intelligence infrastructure soared to a record of nearly $35 billion in the September quarter. Shares of both companies slumped.

However, rival tech giant and Google parent Alphabet bucked the trend, with shares rising in after-hours trading after it beat revenue expectations. In energy markets, Brent crude was last down 0.5% at $64.59 per barrel.