(Bloomberg) — Most Asian stocks are set to fall early Monday as traders rein in expectations of a Federal Reserve easing and come to terms with the costs of President-elect Donald Trump’s proposed fiscal and trade policies.
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Stock futures in Australia, Japan and mainland China pointed to losses, while contracts in Hong Kong traded higher. U.S. stocks fell 1.3% on Friday, wiping out more than half of their gains from the U.S. election.
A soft start threatens to extend last week’s global sell-off as investors weigh the prospect that Trump’s tariffs and tax cuts could potentially reignite inflation in an already robust U.S. economy. Insights are emerging that the Fed could pause the easing cycle in 2025, with the likelihood of a rate cut next month now seen as less than a coin toss.
“Another Fed cut is still likely in December, but it is now a close call,” wrote Shane Oliver, chief economist at AMP Ltd. in Sydney, in a note to customers. “A slower pace of easing is likely next year, especially given that Trump’s policies on tariffs and more tax cuts pose some upside threats to inflation over a one- to three-year horizon.”
The dollar was steady against major peers in early trading after rising 1.4% last week, a seventh straight weekly gain as Treasury yields rose on lowered expectations for Fed policy. These moves, coupled with concerns about Chinese growth, have devastated everything from the Australian dollar to emerging market bonds. Asian shares fell 3.9% last week, the worst sell-off in about six months.
In Asia, traders will look to a speech and media briefing from Bank of Japan Governor Kazuo Ueda on Monday for clues on the central bank’s next policy move, after officials expressed concerns about the yen’s rapid weakening. Markets are pricing in about 14 basis points of rate hikes in December, according to swap data compiled by Bloomberg, ahead of this week’s inflation data.
“Ueda’s press conference should be the biggest focus this week in determining the timing of the BoJ’s next rate hike,” Barclays strategists led by Themistoklis Fiotakis wrote in a note to clients. “USD/JPY could remain under upside pressure in the near term due to Trump’s carry trades and the yen, but is likely to rise more slowly as the rate approaches 160 due to currency intervention and positioning concerns for faster interest rate increases.”
Elsewhere this week, Chinese banks are expected to keep their prime interest rates unchanged after a cut in October. Bank Indonesia will make a policy decision as the rupiah approaches 16,000 per dollar on Friday, an important psychological level for a central bank focused on currency stability.
