Asian markets struggled on Thursday as weak performance in China pulled regional shares lower, while U.S. bond yields rose alongside the dollar as investors closely watched shifting U.S. monetary policy and inflation forecasts following Donald Trump’s return to the White House. Bitcoin, meanwhile, retained its record-breaking momentum, trading just above $90,000 following Trump’s victory and the perceived crypto-friendly stance of his new administration.
Longer-dated U.S. Treasury yields reached multi-month highs on Thursday, with the 10-year yield peaking at 4.483%—its highest since early July—while the 30-year yield hit 4.6624%, both benchmarks pushed higher as investors grappled with Trump’s anticipated economic policies. Trump’s platform, emphasizing lower taxes and increased tariffs, has fueled speculation that inflation could be stoked in the near term, potentially limiting the Federal Reserve’s flexibility in easing rates over the next few years.
“The uncertainty surrounding Trump’s policies is affecting expectations for the Fed’s future actions,” explained Boris Kovacevic, a global macro strategist at Convera. “While the Fed’s December projections may not yet fully account for potential changes, these could shift as Trump’s policies are implemented, likely impacting the Fed’s response over time.”
The shift in yields has complicated market forecasts, as investors reassess the Fed’s policy trajectory. Traders are betting on an 83% likelihood of a 25 basis point (bp) rate cut from the Federal Reserve in December, an increase from 59% a day earlier. However, the possibility of additional rate cuts in 2025 and beyond has diminished in light of anticipated inflation from Trump’s trade and tax policies.
Despite rising expectations for a Fed rate cut in December—a move that would typically weaken the currency—the U.S. dollar strengthened against other major currencies on Thursday, driven by the uptick in longer-dated Treasury yields. The greenback appreciated by 0.24% against the yen, closing at 155.86, while the euro reached its lowest value in a year, slipping to $1.0551.
“This dynamic underscores the unique landscape we’re in,” noted Tanvi Gupta, an FX analyst at BNP Paribas. “Rising U.S. yields and inflation concerns are bolstering the dollar in the near term, even as Fed easing expectations persist.”
Meanwhile, the Australian dollar also experienced minor fluctuations. Initially facing downward pressure following a weaker-than-expected employment report, it rebounded slightly to $0.6487, highlighting the mixed sentiment in global forex markets.
Asian equities were broadly down on Thursday, with the MSCI’s Asia-Pacific index (excluding Japan) declining 0.3%. A primary factor was the drop in Chinese stocks, where the CSI300 blue-chip index decreased by 0.16% and the Shanghai Composite Index shed 0.24%. The Hang Seng Index in Hong Kong followed suit, losing 0.34%.
Investors were largely unmoved by Beijing’s recent support measures, including tax incentives on property and land transactions introduced by the Chinese Ministry of Finance on Wednesday. The country’s property market, a significant driver of its economy, has faced a prolonged downturn since 2021, and analysts remain cautious about the impact of the latest measures.
“While these incentives could support potential homebuyers, the underlying issues persist,” stated Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “The inventory glut in China’s real estate sector is far from resolved, and sentiment around property investment remains subdued.”
Japan’s Nikkei index also dipped, erasing early gains to finish 0.14% lower, in line with broader declines across Asia.
In the cryptocurrency market, Bitcoin, the world’s largest cryptocurrency, sustained its upward trajectory, trading 1.7% higher at $90,151 after surpassing the $90,000 mark for the first time in the previous session. Bitcoin has surged by over 30% in the last two weeks, fueled in part by investor sentiment surrounding Trump’s return to office and the belief that his administration will be favorable toward digital currencies.
Trump’s perceived support for the cryptocurrency industry has reignited enthusiasm within the market, with industry insiders anticipating regulatory reforms that could favor digital assets. “The market is responding to the hope that Trump will enact policies that legitimize and support cryptocurrencies,” remarked Dan Hoffman, an analyst with Blockchain Capital.
Commodity markets also reflected the day’s global trends. Oil prices dropped on Thursday, with Brent crude futures down 0.18% to $72.15 a barrel, while U.S. West Texas Intermediate (WTI) crude futures decreased 0.28%, landing at $68.24 per barrel. These declines reflect concerns over the global economic outlook and a strengthening dollar, which typically weighs on oil prices as it makes dollar-denominated commodities more expensive for holders of other currencies.
Meanwhile, gold—a traditional safe-haven asset—fell 0.42% to $2,562.25 an ounce, as rising Treasury yields reduced the appeal of non-yielding assets. Gold’s retreat aligns with broader market trends as investors increasingly pivot to dollar-backed securities amid ongoing uncertainties.
Edison Research announced on Wednesday that the Republican Party is projected to control both houses of Congress following Trump’s victory, a development that would smooth the path for his proposed economic policies. This political landscape, while promising for Trump’s agenda, has heightened inflation fears in the markets, as his plans for tax cuts and tariffs could further restrict the Fed’s policy options.
Kovacevic at Convera explained, “With Congress behind him, Trump is likely to push his economic priorities through at an accelerated pace, increasing inflation risks in the short to medium term. The market is well aware that such policies will put upward pressure on prices, creating a complex balancing act for the Fed.”
Trump’s stance on China trade policy has also come under close scrutiny. If the new administration pushes for further tariffs or trade barriers, inflation could rise further, straining global supply chains and complicating the Fed’s ability to counter inflationary pressures domestically.
In China, policymakers continue to grapple with economic slowdown, as growth in the world’s second-largest economy remains lackluster. The latest measures unveiled by Beijing are intended to revive the sluggish property market by providing tax incentives for home and land purchases, though the effectiveness of these moves remains questionable.
The extended downturn in China’s property market, which began in 2021, has had a far-reaching impact on the broader economy, leading to an increased inventory of unsold homes and dampened consumer sentiment. “While China is attempting to stabilize its real estate sector, deep structural issues continue to affect economic momentum,” commented Alvin Tan.
