(Bloomberg) — Most Asian stocks fell as traders weighed the impact of newly-elected President Donald Trump’s likely policy agenda and a stronger dollar on regional economies.
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The benchmark MSCI Asia Pacific Index fell for a third day as government bond yields rose, threatening to lure funds back into US assets. Bloomberg’s gauge for the dollar rose for a fourth session, returning to a one-year high. Hong Kong stocks led the regional declines as investors continued to worry about the lack of new stimulus from China.
While the so-called Trump trade is boosting the dollar and US stocks, the impact of the former president’s policies is expected to be less positive on assets elsewhere in the world. His plan to raise tariffs is expected to weigh on economies around the world, especially countries like China, which are major exporters to the US.
“There are questions about another round of Trump tariffs, the deficit and upward pressure on the dollar, forcing the Fed to slow the pace of easing,” said Phillip Wool, head of portfolio management at Rayliant Global Advisors. “All of these concerns appear to be becoming increasingly important among investors today and are weighing on Asian equities.”
The ten-year yield on government bonds rose by no less than three basis points to 4.34%. The Bloomberg Dollar Spot Index was higher for a third day after rising 0.5% on Monday. Oil prices were little changed after the biggest drop in two weeks.
“Better economic data, perhaps an overly dovish Fed, and more policy details from the Trump administration could push Treasury yields higher,” LPL financial strategists wrote in a client note Monday. “It will take negative economic surprises for yields to decline meaningfully from current levels.”
Emerging Asian currencies weakened against the dollar, with the Thai baht and Indonesian rupiah leading decliners.
China’s benchmark CSI 300 Index swung between gains and losses, getting at least some support from a report saying authorities plan to cut taxes on home purchases to revive the moribund housing market. A Bloomberg Intelligence gauge of developers’ stocks rose as much as 0.3% after the news before falling back.
“It’s not enough to get investors excited about a housing recovery; the demand isn’t there and this isn’t really driving demand,” said Sat Duhra, fund manager at Janus Henderson Investors in Singapore. “The recent inflation shows that this deflation is more difficult to reverse and that piece by piece the low confidence in China will not change.”
Tencent Holdings Ltd.’s results and Alibaba Group Holding Ltd. this week will shed light on how their efforts to streamline businesses and cut costs have bridged them until Beijing’s stimulus measures can boost consumer spending.
The S&P 500 closed 0.1% higher on Monday, hovering around 6,000 points and posting its 51st record this year. The Dow Jones Industrial Average gained 0.7%.
The next important agenda item appears to be the American inflation figures that will be released on Wednesday. The main consumer price index, which excludes food and energy, likely rose at the same pace on both a monthly and annual basis compared to September’s figures.
According to JPMorgan Chase & Co, US stocks could rise more strongly at the end of the year after Trump’s victory in the presidential election than when he became president eight years ago.
“I expect returns in 2024 to exceed those in 2016,” Andrew Tyler, the bank’s head of U.S. market intelligence, wrote in a note to clients. A big advantage for the S&P 500 is weakness outside the US, with China, the UK, the EU, Canada and Mexico all experiencing softer growth than at the time.
Main events this week:
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Germany CPI, ZEW survey, Tuesday
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Fed speakers on Tuesday include Christopher Waller, Patrick Harker and Neel Kashkari
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The Fed will release a survey of senior bank loan officers on Tuesday
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Industrial production in the eurozone, Wednesday
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US CPI, Wednesday
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Fed speakers Wednesday include Jeffrey Schmid, Lorie Logan, Neel Kashkari and Alberto Musalem
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Eurozone GDP, Thursday
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US PPI, unemployment claims, Thursday
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Walt Disney earnings, Thursday
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Fed speakers Thursday include Jerome Powell, John Williams and Adriana Kugler
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Chinese retail sales, industrial production, Friday
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US retail sales, Empire production, industrial production, Friday
Some of the major moves in the markets:
Stocks
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S&P 500 futures fell 0.1% as of 2:10 p.m. Tokyo time
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Nikkei 225 futures (OSE) fell 0.9%
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Japan’s Topix fell 0.1%
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Australia’s S&P/ASX 200 fell 0.1%
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Hong Kong’s Hang Seng fell 2.3%
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The Shanghai Composite fell 0.3%
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Euro Stoxx 50 futures fell 0.5%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro fell 0.1% to $1.0643
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The Japanese yen rose 0.1% to 153.50 per dollar
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The offshore yuan fell 0.3% to 7.2478 per dollar
Cryptocurrencies
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Bitcoin rose 0.5% to $88,444.39
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Ether rose 0.2% to $3,332.49
Bonds
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The yield on ten-year government bonds rose by two basis points to 4.32%
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Japan’s 10-year yield was little changed at 1,000%
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The Australian ten-year yield fell by one basis point to 4.56%
Raw materials
This story was produced with the help of Bloomberg Automation.
–With help from Jason Scott.
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