(Bloomberg) — Asian stocks rose, following their U.S. counterparts, as investors positioned for a second Donald Trump presidency and an expected rate cut by the Federal Reserve.
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Chinese stocks were among the biggest gainers on optimism that Beijing will roll out more stimulus measures. The S&P 500 rose 2.5% on Wednesday, the best post-election day in history, and the Nasdaq 100 rose 2.7%. The Fed is expected to cut interest rates by a quarter point on Thursday.
The rally in U.S. stocks reflected expectations that a Trump policy agenda focused on lower taxes and less regulation could support corporate profits. At the same time, 10-year Treasury yields rose 16 basis points on Wednesday on expectations that the president-elect’s budget plans and proposal to raise rates will boost inflation and erode the Fed’s ability to cut rates .
“After digesting Trump’s victory as president, investors in Asia are now focusing on China’s upcoming stimulus announcements,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong. “Hope is growing that China will unveil a substantial fiscal package in the coming days, which will boost the flagging economy.”
Chinese shares opened lower but then rallied to gains, with the CSI 300 Index rising as much as 2%. Consumer and real estate stocks rose as traders expected Beijing to shift its focus to boosting domestic demand to offset the negative impact of Trump’s return to the White House.
Chinese policymakers cut their daily benchmark interest rate for the yuan to the lowest level since late 2023, a sign the central bank is allowing depreciation after a rise in the dollar battered the currency.
In other positive news, a report showed that China’s export growth rose to the fastest pace in more than two years in October, extending a months-long period of resilience that helped support the economy before a barrage of stimulus measures followed. were aimed at stimulating domestic demand.
“It is very likely that we will see significantly more fiscal and monetary stimulus from Beijing, which could offset some of the trade headwinds,” said David Chao, global market strategist at Invesco in Singapore. “All eyes are on what may emerge from China’s policy toolkit following the conclusion of the NPC Standing Committee meeting on November 8.”
Chinese regulators have ordered the country’s banks to cut the interest they pay on demand deposits from other financial institutions, in an effort to free up unused funds to stimulate the economy, people familiar with the matter said.
The yen strengthened after Japan’s chief currency official Atsushi Mimura said authorities would take appropriate action against excessive currency movements. The currency was down about 2% on Wednesday as the dollar rose after Trump’s victory.
Bloomberg’s dollar index traded lower after rising about 1.3% on Wednesday. The yield on 10-year government bonds fell by one basis point to 4.42%.
Spreads on Asian investment-grade dollar bonds tightened to record lows, while note yield premiums fell by at least one basis point, according to credit traders. Spreads narrowed to 73 basis points on Wednesday, the lowest at the time based on data compiled by Bloomberg going back to 2009.
Fed officials are widely expected to cut their benchmark interest rate by 25 basis points at the end of their two-day meeting, a move that will follow a half-point cut in September. They forecast another quarter-point reduction this year, in December, and an additional full point of reductions in 2025, according to the median estimate released in September.
“What investors really want to know is: how will new President Donald Trump’s proposed fiscal and rate policies affect the FOMC’s interest rate outlook,” Bloomberg economist Anna Wong wrote in a research note. “FOMC participants are probably wrestling with that question.”
Wall Street’s “fear gauge” – the VIX – fell the most since August on Wednesday. Nearly 19 billion shares changed hands on US stock exchanges, 63% above the daily average over the past three months.
Bitcoin, seen by many as a so-called Trump trade after he embraced digital assets during his campaign, fell on Thursday after rising to a record high the day before. Oil gained after a rollercoaster session on Wednesday as traders weighed the likely impact of Trump’s election victory on the crude market.
Main events this week:
Chinese trading, currency reserves, Thursday
British BOE interest rate decision, Thursday
Fed rate decision, Thursday
Consumer Confidence at the American University of Michigan, Friday
