Asian equities saw positive momentum on Monday, following a strong performance from US markets, as a recent conversation between Donald Trump and Xi Jinping fueled optimism over potential de-escalation of US-China tensions. Shares rose in Australia, Japan, Hong Kong, and mainland China, with US-listed Chinese stocks surging 3.2% after Trump described the pre-inauguration talks between the two leaders as “very good.” Meanwhile, US futures were slightly lower, with Wall Street closed for a holiday.
The discussions between Trump and Xi, covering topics such as trade, TikTok, and fentanyl, have set a hopeful tone for bilateral relations in the early days of the new administration. Additionally, TikTok announced the restoration of its services in the US on Sunday after Trump agreed to pause enforcement of a law requiring the app’s Chinese owner to sell it within three months.
Kyle Rodda, a senior analyst at Capital.com in Melbourne, commented, “While the positive exchange between Trump and Xi is unlikely to resolve the broader strategic competition, it provides a boost to market sentiment, especially after much stronger-than-expected Chinese growth data last week failed to significantly move Asian indices.”
However, traders are preparing for the potentially volatile early days of Trump’s second term. The president is expected to sign numerous executive orders in areas like immigration, energy, federal workforce, and regulatory reform, aiming to quickly advance his policy agenda. These measures, including stricter border controls and plans for mass deportations, are likely to stir market uncertainty.
Barclays analysts, including Ajay Rajadhyaksha, warned that financial markets could experience turbulence as investors digest the incoming administration’s policy shifts. “With over a hundred executive orders planned for day one, spanning tariffs, deregulation, and other sectors, markets will likely face challenges in interpreting the details,” they wrote.
Meanwhile, Chinese banks kept their key loan prime rates unchanged, in line with expectations from Bloomberg Intelligence.
As the World Economic Forum kicks off later on Monday, notable billionaires including Larry Fink, Ray Dalio, and Marc Benioff are expected to attend the gathering in Davos, Switzerland. Trump is scheduled to address the forum virtually on Thursday, three days after his inauguration.
Attention will also shift later in the week to the Bank of Japan’s policy decision, with economists predicting a rate hike. According to Bloomberg, there’s a 99% chance the central bank will raise rates, as long as Trump’s administration doesn’t trigger unforeseen negative economic shocks.
In the cryptocurrency sector, a new digital token launched by Trump has generated billions of dollars in trading volume, raising concerns about potential conflicts of interest. Meanwhile, the broader cryptocurrency market struggled, with Bitcoin down 3.5% on Monday.
The US dollar has strengthened by over 5% since Election Day, mirroring trends seen after Trump’s 2016 victory. The rise has been driven by global currency weaknesses, particularly in the euro and Canadian dollar, which are seen as vulnerable to Trump’s economic policies. China’s yuan has depreciated by more than 3% against the dollar since November 5, primarily due to tariff concerns and the growing yield gap between US and Chinese government bonds.
In the oil market, prices remained steady as investors brace for potential volatility during the early stages of Trump’s second term.
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