Asian Markets Tumble Amid Trump Win, Anticipated Fed Rate Cuts

Most Asian stocks slid on Thursday as investors weighed the economic impact of Trump’s second presidency, particularly his promise of increased tariffs. In response, the dollar climbed, adding over 1% on Wednesday.

Major indices fell in China, Australia, and South Korea, while Japan showed mixed results. This followed a record surge in the S&P 500, which climbed 2.5% on Wednesday, marking its best post-election day ever, with the Nasdaq 100 up by 2.7%. Many expect the Federal Reserve (Fed) to cut interest rates today, a move closely watched by global markets.

US stock gains largely reflect expectations of Trump’s pro-business agenda, centered on tax cuts and lighter regulations, which could potentially bolster corporate profits. However, Treasury yields jumped 16 basis points as Trump’s fiscal and tariff plans are predicted to fuel inflation, complicating the Fed’s efforts to reduce borrowing costs.

In China, the CSI 300 Index fell by 1%, marking its second consecutive day of losses, as Trump reiterated his commitment to tariffs on Chinese goods to boost US manufacturing. “The world is now seen through Trump’s ‘zero-sum’ lens, with China at a disadvantage,” remarked Kyle Rodda, a senior market analyst at Capital.com Inc.

The Bloomberg Dollar Index rose 1.3% on Wednesday, pushing the yen down by about 2%. The yen recovered slightly on Thursday after Japan's currency official, Atsushi Mimura, pledged intervention if volatility continues. China, meanwhile, adjusted the yuan’s daily reference rate to its lowest point since late 2023, signaling a willingness to allow depreciation amid a strong dollar.

The Federal Reserve is widely anticipated to cut rates by a quarter-point today, adding to the half-point cut in September. Analysts at BMO Wealth Management expect another cut in December and potentially two or three more in 2025, depending on economic growth and policy dynamics.

Wall Street’s "fear gauge," the VIX, plummeted on Wednesday, while trading volume surged to 63% above the average for the past three months.

Bitcoin, often dubbed a "Trump trade", slid early Thursday after a record-breaking high, while oil stabilized and gold declined for a second consecutive day.

Key economic events this week include:

• China's trade and foreign exchange reserves data (Thursday)
• Bank of England rate decision (Thursday)
• Fed rate decision (Thursday)
• US consumer sentiment report by the University of Michigan (Friday)

Market Movements:

• Stocks:
  • S&P 500 futures remained steady at 10:30 am Tokyo time.
  • Japan’s Nikkei 225 futures fell 1.2%; Topix gained 0.5%.
  • Australia’s S&P/ASX 200 fell 0.5%.
  • Hong Kong’s Hang Seng and Shanghai Composite both fell 0.8%.
• Currencies:
  • Dollar Spot Index rose 0.1%.
  • Euro slipped 0.1% to $1.0715.
  • Japanese yen and offshore yuan showed minimal change.
• Cryptocurrencies:
  • Bitcoin down 0.4% to $75,651.6.
  • Ether up 4.8% to $2,819.
• Bonds:
  • 10-year Treasury yield held at 4.43%.
  • Japan’s 10-year yield rose 1.5 basis points; Australia’s up two basis points.
• Commodities:
  • WTI crude up 0.3% to $71.87 per barrel.
  • Spot gold dipped 0.4% to $2,648.77 an ounce.