Asian stock markets experienced notable gains following a positive discussion between US President-elect Donald Trump and Chinese President Xi Jinping, sparking optimism about a potential de-escalation of trade tensions between the two economic giants.
Shares in key regional markets, including Australia, Japan, and China, surged after Trump described the pre-inauguration conversation as “very good,” with Chinese stocks listed in Hong Kong rising by up to 2.4%. The upbeat sentiment contrasted with a slight dip in US futures, as Wall Street remained closed for the holiday.
The Trump-Xi exchange, which touched on critical issues such as trade, the TikTok app, and fentanyl control, has raised expectations for a cooperative relationship between the two leaders. Additionally, TikTok resumed services in the US on Sunday after Trump announced a three-month halt to enforcement of a law mandating the Chinese ownership of the platform to find a buyer.
Despite the promising signs, the sustainability of the market optimism depends largely on how swiftly Trump moves forward with his economic agenda, which includes tax cuts, potential tariff hikes, and stricter immigration policies. Analysts remain cautious about the inflationary effects these measures may have, possibly strengthening the dollar and maintaining elevated Treasury yields. The ongoing US-China tech rivalry and Trump’s stance on climate change will also likely influence sector-specific investment decisions, particularly in industries like semiconductors, electric vehicles, and shipbuilding.
Bonnie Glaser, Managing Director of the Indo-Pacific program at the German Marshall Fund, noted that while Trump appears eager to build a positive rapport with Xi, his dissatisfaction with certain Chinese policies remains clear.
Meanwhile, Chinese banks held their key loan prime rates steady, as predicted by Bloomberg Intelligence.
The World Economic Forum (WEF) annual meeting commenced on Monday, attracting influential business figures such as Larry Fink, Ray Dalio, and Marc Benioff, who are all set to gather in Davos, Switzerland. Trump is scheduled to address the forum virtually later this week, three days after his inauguration.
Market attention will soon shift to the Bank of Japan’s policy decision on Friday, with a significant majority of economists in a Bloomberg survey predicting an interest rate hike. Some BOJ officials also see a rate increase as likely, provided Trump’s administration doesn’t introduce immediate negative surprises.
Adding complexity to the global economic landscape, Trump’s digital token has triggered significant trading activity in the cryptocurrency market, though it has also sparked concerns over potential conflicts of interest. Meanwhile, Bitcoin, the largest cryptocurrency by market capitalization, dropped 2% on Monday.
The Bloomberg Dollar Spot Index has gained over 5% in the ten weeks following the US presidential election, mirroring the dollar’s rally after Trump’s 2016 victory. The currency’s rise has been fueled by concerns about the economic impact of Trump’s policies, especially on global currencies, including the euro and Canadian dollar. The Chinese yuan, in particular, has fallen by more than 3% against the dollar since November 5, driven by tariff risks and widening yield differentials between US and Chinese bonds.
In the commodities market, oil prices held steady in anticipation of the uncertainty surrounding Trump’s second term. Investors are bracing for possible market volatility as Trump assumes office once again.
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