Stocks fell early Thursday in Asia after US shares raced to records as investors bet on what Donald Trump’s return to the White House will mean for the economy and the world.
Markets also turned their attention to the Federal Reserve’s decision on interest rates, due to be announced later in the day.
Japan’s Nikkei 225 lost early gains, falling 0.6% to 39,246.86, while Seoul’s Kospi fell 0.4% to 2,554.57.
Australia’s S&P/ASX 200 fell 0.1% lower to 8,191.00.
Chinese shares also fell. Hong Kong’s Hang Seng fell 0.7% to 20,386.36. The Shanghai Composite index also fell 0.7% to 3,359.99.
Trump has pledged to impose blanket tariffs of 60% on all Chinese imports, raising them further if Beijing moves to invade the self-governing island of Taiwan.
Investors are expanding their previously made expectations about what the higher rates, lower taxes and lighter regulations favored by Trump will mean. Higher tariffs on imports from China would increase the burden Beijing faces as the country struggles to revive slowing growth in the world’s second-largest economy.
Higher tariffs on imports from China, Mexico and other countries would also increase the risk of trade wars and other disruptions to the global economy.
However, on Wednesday the US stock market, Elon Musk’s Tesla, banks and bitcoin all surged higher as investors placed bets on what Donald Trump’s return to the White House will mean for the economy and the world. The market sees among the losers: the renewable energy industry and possibly everyone who is concerned about higher inflation.
The S&P 500 rose 2.5% to 5,929.04 for its best day in almost two years. The Dow Jones Industrial Average rose 3.6% to 43,729.93, while the Nasdaq composite rose 3% to 18,983.47. All three indexes surpassed the records they set in recent weeks.
The impact of Trump’s second term will likely depend on whether his fellow Republicans win control of Congress, and that is not yet clear.
Investors may see Trump’s policies leading to stronger economic growth. That helps push prices down and boost yields for government bonds. Tax cuts under Trump could further increase the US government’s budget deficit, increasing borrowing and raising interest rates even further. The yield on the 10-year government bond rose to 4.43% from 4.29% late Tuesday, an important step for the bond market. It has increased significantly from August, when it was below 4%.
Investors expect the incoming president’s policies, especially higher rates, to fuel inflation and raise costs for American households. Sharp cuts in immigration could also leave businesses short of work, forcing companies to raise wages for workers more quickly and put more upward pressure on prices.
