Asian equities saw mixed performance on Friday as investors awaited the outcome of a critical legislative session in China, anticipated to announce new measures aimed at revitalizing sluggish economic growth. China’s CSI 300 Index, after initial gains, retreated as traders speculated on the scope of potential policy support from the Standing Committee of the National People’s Congress, China’s primary legislative body. Market participants are weighing whether any forthcoming measures could counterbalance the risks posed by potential tariffs under a possible second term for former U.S. President Donald Trump.
Across the region, shares in Australia and Taiwan rallied, contributing to a second consecutive day of gains on the broader regional equity gauge. This follows positive momentum from U.S. markets, where the S&P 500 rose 0.7% and the Nasdaq 100 surged 1.5%, buoyed by the Federal Reserve’s recent interest rate cut. Treasury bonds and U.S. equity futures traded with little change during Asian market hours.
According to Michelle Lam, Societe Generale SA’s economist for Greater China, anticipated policy initiatives from China could include support for local government debt and incentives to boost consumer spending. However, she emphasized the necessity for a careful balance in light of potential tariff hikes from the U.S., noting that the proposed 60% tariffs from Trump may not materialize. “There’s significant uncertainty surrounding U.S. tariffs,” Lam remarked, adding that a modest tariff increase of 15% to 20% could be more manageable for China’s economy.
A broad-based rally on Thursday was further propelled by comments from Federal Reserve Chair Jerome Powell, who highlighted the resilience of the U.S. economy and left the door open to a possible rate cut in December. Powell stated the upcoming election would not influence policy in the immediate term and affirmed he would not vacate his position if requested by Trump.
“Powell and the Fed underscored the U.S. economy’s solid foundation,” said Bret Kenwell of eToro. He observed that Powell’s stance on a potential December rate cut remained non-committal, aligning with investors’ expectations. Kenwell noted that the Fed appeared increasingly confident in the labor market and broader economic landscape relative to recent months.
In Japan, Nissan Motor’s shares plummeted up to 10% in Tokyo, marking their lowest since October 2020, after the automaker announced plans to cut 9,000 jobs and reduce manufacturing capacity by 20% due to a significant drop in net income in the first half of the year.
Meanwhile, United Overseas Bank saw gains in Singapore following a strong earnings report that exceeded forecasts and a proposal to consider a share buyback. Singaporean banks are increasingly expanding wealth management services to offset revenue impacts from lower interest rates.
Chinese banks are also stepping into more high-yield offshore loans for mainland firms as domestic rates decrease amid ongoing monetary easing. In South Korea, the government committed to closely monitoring financial markets, with plans for “active” intervention to address any undue volatility.
The Bloomberg Dollar Index edged higher in Asia after a 0.8% drop on Thursday, marking its steepest decline since August as the greenback retraced gains from the recent election. The yen rallied against the dollar for a second consecutive session, though Japanese Democratic Party for the People leader Yuichiro Tamaki suggested the yen could face pressure if the U.S. pursues inflation control through higher interest rates.
In the U.S., the Federal Reserve lowered the federal funds rate by 25 basis points, noting “labor market conditions have generally eased.” The Fed statement omitted any language about the need for “further” progress on inflation, observing instead that inflation “has made progress toward the committee’s 2% objective but remains somewhat elevated.”
A Bloomberg index of the “Magnificent Seven” tech giants rose by 2.3%. Ride-hailing firm Lyft Inc. saw its shares surge by 23% after issuing an optimistic financial outlook. Meanwhile, a key banking sector index dropped 2.7% after posting a 10% gain in the prior session, with JPMorgan Chase & Co. falling 4.3% following an analyst downgrade.
Gold pared some of its gains from Thursday, while oil headed for a weekly increase. Bitcoin ended its four-day rally with a dip.
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