Asian markets, shares rose on Tuesday, influenced by Wall Street’s upbeat performance and tempered expectations about the incoming U.S. administration’s tariff strategies. Investors speculated that President-elect Donald Trump might adopt a less aggressive trade stance than he pledged during his campaign, particularly concerning tariffs.
On Monday, The Washington Post reported that Trump’s aides were considering a more selective approach to tariffs, targeting specific sectors crucial to national or economic security rather than imposing broad-based measures. This news initially lifted investor sentiment, sending stock prices higher and the U.S. dollar lower. However, Trump’s swift denial on his Truth Social platform tempered some of the optimism, partially reversing the dollar’s decline.
Khoon Goh, head of Asia research at ANZ, highlighted the uncertainty surrounding Trump’s trade policies. “No one really knows for sure what kind of tariffs or trade policies the Trump administration will implement,” Goh remarked. He added that while Trump continues to talk tough on tariffs, his history of deal-making offers some hope for less drastic measures.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.16% during the early Asian session. Japan’s Nikkei led the rally with a 2% jump, buoyed by strong performances in technology stocks.
In China, the CSI300 index overcame early losses to edge 0.12% higher, though the Shanghai Composite Index dipped slightly by 0.09%. Meanwhile, Hong Kong’s Hang Seng Index fell 0.43%, reflecting mixed investor sentiment.
Reports surfaced that Chinese stock exchanges had urged large mutual funds to limit stock selling at the start of the year. This move appears to be part of broader efforts by Chinese authorities to stabilize markets amid ongoing economic uncertainties.
The dollar hovered near a one-week low at 108.36, recovering slightly from previous losses. The euro and sterling, which had seen sharp gains following the Washington Post report, both pared back by 0.1%, trading at $1.0377 and $1.25085, respectively.
Attention now turns to the euro zone, where inflation figures due later on Tuesday are expected to shape the European Central Bank’s monetary policy. Markets currently anticipate nearly 100 basis points of rate cuts in 2025, contingent on forthcoming data.
A flurry of U.S. economic data releases this week will offer further insights into the health of the American economy. The December nonfarm payrolls report, set for release on Friday, is the centerpiece. Ahead of that, data on ADP hiring, job openings, and weekly jobless claims will provide a preview.
A strong performance in these metrics could reduce the likelihood of further rate cuts by the Federal Reserve. Market expectations for rate cuts in 2025 have already been dialed back to 40 basis points.
The minutes from the Fed’s last meeting, due on Wednesday, are expected to provide additional clarity on policymakers’ outlooks. Moreover, several top Federal Reserve officials are scheduled to speak, offering live commentary that could sway market sentiment.
U.S. Treasury yields remained resilient, with the benchmark 10-year yield at 4.6219%, having touched a high since May in the previous session. The two-year yield stabilized at 4.2704%.
The dollar reached a six-month high against the Japanese yen, trading at 158.425. In contrast, the Canadian dollar weakened slightly to 1.4345 per U.S. dollar, following Canadian Prime Minister Justin Trudeau’s announcement of his forthcoming resignation.
Thierry Wizman, a global FX and rates strategist at Macquarie, commented on the potential impact of Canada’s political landscape. “Should Canada move toward an early election with a Conservative-led government, the CAD could appreciate. This is based on the view that certain outcomes will likely improve under Conservative leadership,” Wizman noted.
Oil prices experienced a slight decline, with Brent crude falling 0.37% to $76.02 per barrel and U.S. crude dipping 0.46% to $73.22 per barrel. In contrast, spot gold prices rose by 0.18%, trading at $2,640.49 an ounce, reflecting ongoing demand for safe-haven assets amid global economic uncertainties.
