(Bloomberg) — Most Asian shares fell as traders weighed the impact of president-elect Donald Trump’s likely policy agenda and the stronger dollar on regional economies.
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The MSCI Asia Pacific Index slipped for a third day as Treasury yields rose, threatening to lure funds back to US assets. Hong Kong shares led regional equity declines following reports that Trump’s cabinet will include a number of China hawks. US and European stock futures also dropped and the dollar strengthened.
While the so-called Trump trade helps boost the dollar and US stocks, the impact of the former president’s policies are expected to be less positive on assets elsewhere in the world. His plan to boost tariffs is set to weigh on economies around the globe, especially countries such as China which are major exporters to the US.
“There are question marks around 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 those anxieties seem to be registering more significantly with investors today and weighing on Asian shares.”
Treasury 10-year yields climbed as much as three basis points to 4.34% as trading of US government securities reopened in Asia following a US holiday on Monday The Bloomberg Dollar Spot Index gained 0.2% after rising to a one=year high on Monday. Oil was little changed following its biggest decline in two weeks.
Hong Kong’s Hang Seng Index slipped as much as 3% amid uncertainties over the incoming Trump administration’s China policy and disappointment over Beijing’s latest stimulus sour sentiment.
“Trump’s reported appointments of well-known China hawks such as Marco Rubio and Mike Waltz are indeed weighing on the Hong Kong market’s sentiment,” said Homin Lee, senior macro strategist at Lombard Odier. “This underscores the high likelihood of Trump following through on his campaign pledge to implement punitive tariffs on China’s exports to the US.”
China’s benchmark CSI 300 Index swung to a loss after earlier drawing at least some support from a report saying the authorities are planning to cut taxes for home purchases to help revive a moribund housing market. A Bloomberg Intelligence gauge of developers’ shares climbed 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 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 turning around this deflationary slide is more difficult to change and piecemeal measures won’t change the 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 lower costs have tided them over until Beijing stimulus can lift consumer spending.
The S&P 500 closed 0.1% higher on Monday, hovering near the 6,000 mark and notching its 51st record this year. The Dow Jones Industrial Average gained 0.7%.
The next major item on the agenda looks to be US inflation figures due Wednesday. The core consumer price index, which excludes food and energy, likely rose at the same pace on both a monthly and annual basis compared with September’s readings.
US stocks may rally more into year-end following Trump’s presidential election victory than they did when he won the presidency eight years ago, according to JPMorgan Chase & Co.
“I expect 2024 returns to be larger than 2016,” Andrew Tyler, the bank’s head of US 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, EU, Canada and Mexico all experiencing softer growth than they did back then.
Key events this week:
Germany CPI, ZEW survey, Tuesday
Fed speakers include Christopher Waller, Patrick Harker and Neel Kashkari, Tuesday
Fed issues survey of senior bank loan officers, Tuesday
Eurozone industrial production, Wednesday
US CPI, Wednesday
Fed speakers include Jeffrey Schmid, Lorie Logan, Neel Kashkari and Alberto Musalem, Wednesday
Eurozone GDP, Thursday
US PPI, jobless claims, Thursday
Walt Disney earnings, Thursday
Fed speakers include Jerome Powell, John Williams and Adriana Kugler, Thursday
China retail sales, industrial production, Friday
US retail sales, Empire manufacturing, industrial production, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 2:53 p.m. Tokyo time
Japan’s Topix was little changed
Hong Kong’s Hang Seng fell 2.7%
The Shanghai Composite fell 0.9%
Euro Stoxx 50 futures fell 0.9%
Currencies
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
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.33%
Japan’s 10-year yield was little changed at 1.000%
Australia’s 10-year yield declined two basis points to 4.56%
Commodities
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 assistance of Bloomberg Automation.
–With assistance from Jason Scott and Charlotte Yang.
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