Asian markets faced declines on Tuesday as investors assessed the potential implications of a Trump presidency on Sino-American relations, while the dollar strengthened for a second consecutive day despite expectations of further U.S. interest rate cuts.
The MSCI’s broadest index of Asia-Pacific shares outside Japan dropped by 0.5%, following a 0.3% decrease on Monday. Japan’s Nikkei index, returning from a public holiday, managed a 0.4% gain.
On Wall Street, the Dow Jones closed higher, setting a new record thanks to gains in energy and banking sectors. Meanwhile, Bitcoin surged by 6%, gold approached record highs, and the yield curve steepened as investors favored assets aligned with a potential Trump victory.
Chris Weston, head of research at Pepperstone, noted, “J.D. Vance aligns with a tough stance on China, potentially influencing U.S. trade policies and sentiment towards Chinese equities, which saw increased selling.”
China’s Shanghai Composite index fell by 0.3%, and Hong Kong’s Hang Seng index dropped by 1.4%, extending losses from the previous day following disappointing economic data that raised concerns over Beijing’s growth targets and potential need for aggressive stimulus measures.
In the currency markets, the dollar index edged up by 0.1% to 104.34 against major currencies on Tuesday, supported by expectations of a Trump victory despite market pricing in further Fed rate cuts this year.
Fed Chair Jerome Powell’s comments on inflation supported market expectations of a rate cut in September, contributing to a mixed performance in the U.S. dollar overnight. The dollar gained 0.3% against the Japanese yen, reflecting market uncertainty following suspected intervention by Tokyo.
Analyst Tony Sycamore from IG commented, “I believe the U.S. dollar has likely reached its bottom for now, given reactions to soft CPI data and dovish Powell remarks. Increased risks associated with a Trump administration and potential tariffs on China could further pressure Chinese stocks alongside rising U.S. yields.”
Long-term U.S. Treasury yields eased slightly in Asia, with the 10-year yield down by 1.5 basis points to 4.2138%, after a four basis point increase overnight.
In commodity markets, gold prices rose by 0.2% to $2,426.18 an ounce, nearing a two-month high, while concerns over a slowdown in Chinese demand pushed oil prices lower. Brent futures slipped by 0.2% to $84.72 a barrel, and U.S. West Texas Intermediate crude also fell by 0.2% to $81.77.
The day’s trading underscored heightened market sensitivity to U.S. political developments and their potential global economic implications, shaping investor sentiment across Asia-Pacific markets.
