Asian stocks drop as traders brace for Trump’s US agenda

November 13, 2024 (MLN): Equity benchmarks in Japan and Hong Kong retreated while a gauge of Asian shares touched the weakest level since September 13 amid growing concerns that US President-elect Donald Trump’s proposed tariffs and picks for key administration posts may stoke inflation.

The yen weakened beyond 155 per dollar for the first time since July, raising the risk that Japan will enter the currency market to try to slow the depreciation, Bloomberg reported.

The Bloomberg Dollar Spot Index edged higher along with Treasury yields ahead of a report on US consumer-price inflation. Traders are now pricing in about two US rate cuts through June, against almost four seen at the start of last week.

Sentiment toward Asian equities has turned cautious since Trump’s election, as traders expect his planned policies to further drive up inflation and slow the pace of interest-rate cuts.

The president-elect’s picks for key government posts are also fueling jitters, as he piles his Cabinet with people set to carry out his “America First” policies on the border, trade, national security and economy.

“While focus remains on Trump 2.0, there has been a slight tilt toward tariff fears which are overpowering the expectations of tax cuts given the announcements of China hawks being elevated to key positions in Trump’s cabinets,” said Charu Chanana, chief investment strategist at Saxo Markets.

The US election outcome continues to reverberate across the globe, with an MSCI gauge of equities excluding the US capping its worst day since the August 05 global rout.

An index of developing-market currencies has lost more than 1% following the US vote, coming close to erasing this year’s gains.

Meanwhile, China indicated its discomfort with yuan weakness through its daily reference rate for the currency amid the threat of higher US tariffs under a Trump administration.

The fixing was 445 pips stronger than the average estimate in a Bloomberg survey.

Beijing started marketing dollar bonds in Saudi Arabia, marking the country’s first debt sale in the US currency since 2021.

On the economic front, US data due Wednesday may reinforce concerns about an acceleration in inflation, with analysts predicting that the overall consumer price index probably increased 0.2% for a fourth month.

Fed Minneapolis President Neel Kashkari on Tuesday said he’ll be watching the inflation data closely to determine whether another interest-rate cut is appropriate at the US central bank’s December meeting.

Bitcoin declined after a chartbusting rally took the digital asset to almost $90,000 for the first time. Meanwhile, Trump said Elon Musk and Vivek Ramaswamy will lead the Department of Government Efficiency.

In corporate news, Seven & i Holdings Co. is said to be considering a management buyout to take itself private with funding from banks, Itochu Corp. and the founding Ito family in a transaction that could be worth ¥9 trillion ($58 billion).

In the commodities market, oil steadied near its lowest level this month, with the outlook for demand in focus after OPEC cut projections on China’s slowdown. Gold edged higher.

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