(Bloomberg) — Most Asian stocks fell as traders weighed the impact of President-elect Donald Trump’s likely political agenda and the strengthening dollar on regional economies.
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The MSCI Asia Pacific Index fell for a third straight day as Treasury yields rose, threatening to draw funds back into U.S. assets. Hong Kong stocks led declines in regional shares following reports that Trump’s cabinet will include several China hawks. US and European stock futures also fell and the dollar strengthened.
While the so-called deal with Trump helps boost the dollar and US stocks, the impact of the former president’s policies is expected to be less positive on assets in other parts of the world. His plan to increase tariffs will affect economies around the world, especially countries like China, which are major exporters to the United States.
“There are question marks surrounding another round of Trump tariffs, the deficit and upward pressure on the dollar, which will force the Federal Reserve to slow the pace of easing,” said Phillip Wool, head of portfolio management at Rayliant Global Advisors. “All of those anxieties seem to be registering more significantly among investors today and weighing on Asian stocks.”
Yields on 10-year Treasury bonds rose as much as three basis points to 4.34% as trading in U.S. government securities reopened in Asia following a U.S. holiday on Monday. The Bloomberg Dollar Spot Index gained 0.2% after hitting a one-year high on Monday. Oil was little changed after its biggest drop in two weeks.
Hong Kong’s Hang Seng Index fell as much as 3% amid uncertainties over the incoming Trump administration’s China policy and disappointment over sour sentiment from Beijing’s latest stimulus.
“Trump’s appointments of well-known China hawks such as Marco Rubio and Mike Waltz are indeed weighing on Hong Kong market sentiment,” said Homin Lee, senior macro strategist at Lombard Odier. “This underscores the high likelihood that Trump will make good on his campaign promise to implement punitive tariffs on China’s exports to the United States.”
China’s benchmark CSI 300 index posted losses after gaining at least some support from a report that said authorities are planning to cut taxes on home purchases to help revive a moribund property market. A Bloomberg Intelligence gauge of developer stocks rose as much as 0.3% after the news, before falling.
“It’s not enough to get investors excited about the real estate recovery; the demand is not there and this doesn’t really stimulate demand,” said Sat Duhra, a fund manager at Janus Henderson Investors in Singapore. “Recent inflation shows that reversing this deflationary decline is harder to turn around and incremental measures will not change low confidence in China.”
Results from Tencent Holdings Ltd. and Alibaba Group Holding Ltd. this week will shed light on how their efforts to streamline businesses and cut costs have helped them tide over until Beijing’s stimulus can lift consumer spending.
The S&P 500 closed up 0.1% on Monday, hovering around the 6,000 mark and hitting its 51st record this year. The Dow Jones Industrial Average gained 0.7%.
The next important item on the agenda appears to be the US inflation figures due to be released on Wednesday. The underlying consumer price index, which excludes food and energy, likely rose at the same pace both monthly and annually compared to September readings.
U.S. stocks could rise more by the end of the year following Trump’s victory in the presidential election than when he won the presidency eight years ago, according to JPMorgan Chase & Co.
“I expect 2024 returns to be higher than 2016,” Andrew Tyler, the bank’s head of U.S. market intelligence, wrote in a note to clients. A big plus for the S&P 500 is its weakness outside the US: China, the UK, the EU, Canada and Mexico all experienced weaker growth than back then.
This week’s key events:
Germany CPI, ZEW survey, Tuesday
Fed speakers include Christopher Waller, Patrick Harker and Neel Kashkari on Tuesday.
Fed releases survey of top bank loan officers on Tuesday
Eurozone industrial production, Wednesday
US CPI, Wednesday
Fed speakers include Jeffrey Schmid, Lorie Logan, Neel Kashkari and Alberto Musalem, on Wednesday.
Eurozone GDP, Thursday
US PPI, jobless claims, Thursday
Walt Disney Earnings, Thursday
Fed speakers include Jerome Powell, John Williams and Adriana Kugler on Thursday
China retail sales and industrial production, Friday
US Retail Sales, Empire Manufacturing, Industrial Production, Friday
Some of the main movements in the markets:
Stocks
S&P 500 futures fell 0.1% at 2:53 p.m. Tokyo time.
Japan’s Topix barely changed
Hong Kong’s Hang Seng fell 2.7%
The Shanghai Composite fell 0.9%
Euro Stoxx 50 futures fell 0.9%
Coins
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.1% to $1.0641
The Japanese yen rose 0.1% to 153.51 per dollar
The offshore yuan fell 0.3% to 7.2476 per dollar
Cryptocurrencies
Bitcoin rose 0.6% to $88,579.95
Ether rose 0.1% to $3,331.51.
Captivity
The yield on 10-year Treasury bonds rose two basis points to 4.33%
The yield on the 10-year Japanese bond barely changed and stood at 1,000%
The Australian 10-year bond yield fell two basis points to 4.56%
Raw materials
West Texas Intermediate crude fell 0.4% to $67.80 a barrel
Spot gold fell 0.4% to $2,607.24 an ounce.
This story was produced with the help of Bloomberg Automation.
