(Bloomberg) — Asia’s benchmark equity index erased opening gains as investors weighed the market ramifications of a second Trump presidency, with its promise of steeper tariffs. The dollar edged higher after surging more than 1% on Wednesday.
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Benchmark stock gauges dropped in Australia and South Korea and were mixed in Japan. That was after the S&P 500 jumped 2.5% Wednesday, its best post-election day in history, and the Nasdaq 100 rose 2.7%. The Federal Reserve is forecast to cut interest rates on Thursday.
The gains for US stocks reflected expectations that a Trump policy agenda favoring lower taxes and less regulation may support corporate profits. An index of US banks surged almost 11% on forecasts that potential tax cuts, reduced regulation and the prospect of elevated interest rates would support bank earnings. A benchmark of US small-caps, which can outperform during periods of economic expansion, rose 5.8%.
Hong Kong equity futures dropped, as did a gauge of US-listed Chinese stocks. Trump has pledged to introduce tariffs on Chinese goods to support US manufacturing.
“There is some expectation that global growth might actually improve as there is US fiscal and US fiscal then translates into more demand for goods and services from abroad as US will import more,” Anwiti Bahuguna, CIO of Global Asset Allocation at Northern Trust Asset Management, said on Bloomberg Television. “There are other countries within the Asian region that could benefit from this fiscal stimulus. And the one other country I would like to mention that could benefit from all of this is Japan.”
In Asia, data set for release Thursday includes gross domestic product figures for the Philippines, trade for Australia and foreign reserves and trade for China.
Treasury yields jumped Wednesday reflecting the prospect that Trump election promises including immigration curbs and tariffs may stoke inflation, resulting in elevated interest rates. The moves also signaled concern that Trump’s proposals will boost the budget deficit and spur higher bond supply.
Treasury 10-year yields slipped one basis point Thursday to 4.42% after jumping 16 basis points in US trading.
Bloomberg’s dollar index rose 1.3% Wednesday, while the yen slid about 2%. Japan’s currency edged higher Thursday after chief currency official Atsushi Mimura said the authorities will take appropriate action against excessive currency moves.
