Asian Stocks Set to Rise as Tariff Threat Wanes: Markets Wrap
(Bloomberg) -- Asian markets are set to open higher Tuesday after President Donald Trump held off from imposing sweeping trade tariffs in his first day in office.
Australian shares climbed while equity futures in Japan, Hong Kong and mainland China all pointed to gains once markets open. US stock futures also rose after the cash market was closed for a holiday Monday. Asian currencies are poised to strengthen after Bloomberg’s gauge of the dollar slid more than 1% Monday. Australian bonds rallied.
After being sworn into office, Trump promised to sign a series of executive orders, including one that declares a national emergency at the U.S.-Mexico border. For now though, the executive action will not include new tariffs on the three biggest US trading partners. The president instead ordered his administration to address unfair trade practices globally, suggesting he will take a more deliberative approach to trade relations.
“The fact that we’re seeing signs of a more conciliatory relationship between the US and China, and the fact there could be a more tactful application of tariffs is great for the region,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. “Trump is pretty mercurial and it all could change in a Twitter post, but for now it’s filling investors with confidence that the worst of the trade war may not materialize.”
Investors had been on tenterhooks for the first executive orders to stem from the White House after Trump vowed to quickly implement his “America First” agenda. Since his November election victory, everything from the Australian dollar to European equities have been whipsawed on concern that widespread tariffs would add to global trade frictions, while the dollar surged as the Federal Reserve turned more cautious on easing policy.
An index of Asian currencies this month fell to a record low in data starting in 2006 amid broad greenback strength, while the region’s central banks turned dovish to shore up their economies amid concern economic growth would be crimped. Bank Indonesia last week unexpectedly cut interest rates, while the Bank of Korea stood pat to help the beleaguered won.
Betting on the greenback has become one of Wall Street’s favored trades for those investors expecting that sweeping trade tariffs will crimp global growth, lift US inflation and potentially cause the Fed to refrain from lowering borrowing costs this year.
Monday’s whipsaw moves in equity futures and currencies were seen as providing a foretaste of the uncertainty and volatility to come.
“As much as there is relief today in markets there’s probably now going to be greater volatility going forward,” said Brad Bechtel, head of foreign exchange at Jefferies LLC. “In some ways, it might have been better if we got whatever we were going to get on day one.”
Chinese property developers will be in focus Tuesday after Bloomberg reported officials are taking steps to stabilize operations at China Vanke Co. Trading in three of Vanke’s yuan bonds was halted Monday after prices surged 20% or more following the report that officials of Shenzhen, the southern metropolis where Vanke is based, held a closed-door meeting to discuss the company on Friday.
In commodities, oil slumped after Trump said he plans to invoke emergency powers boost domestic crude production and held off on tariffs that may have restricted supplies. A shift away from renewable energy sources sparked declines in Siemens Energy AG, Enel SpA and Vestas Wind Systems A/S.
Bitcoin retreated from a record high amid heightened swings in crypto markets around Trump’s inauguration.
Here’s how Wall Street reacted as Trump was sworn into office:
Tom di Galoma, head of fixed income at Curvature Securities:
Trump seems to be more focused on the border and less focused on trade issues at this point. He’s probably trying to be really careful with the tariffs at this point to not spook the markets. This should do the trick to bring yields lower this week.
Priya Misra, a portfolio manager at JPMorgan Asset Management
The lack of tariffs on Day 1 is positive for risk assets and Treasuries and negative for the dollar. The market was pricing in at least china tariffs on Day 1 and some chance of universal tariffs, so some of that risk premium will be unwound.
Steve Chiavarone, senior portfolio manager and head of multi-asset at Federated Hermes:
Generally speaking, the market views Trump’s agenda as being pro-growth. The focus today for markets is primarily on tariff policy. There wasn’t anything really new there during the inaugural speech. That’s one reason why the dollar is softer and markers are higher. The executive orders will be the next area to watch.
Key events this week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.