Asian stock markets saw significant declines on Monday, led by Hong Kong, as investor sentiment soured following China’s recent stimulus measures, which fell short of market expectations. The downturn came despite Wall Street’s record highs on Friday, with futures pointing to further gains as markets reopened.
Bitcoin surged to an all-time high of $81,756, driven by optimism surrounding Donald Trump’s presidential victory and the election of pro-crypto candidates to Congress, fueling hopes for a more lenient regulatory stance.
The U.S. dollar remained near its four-month peak against major currencies, as traders looked ahead to critical inflation data from the U.S. and speeches from Federal Reserve officials this week, including Chair Jerome Powell on Thursday.
Hong Kong’s Hang Seng Index dropped 2.5% by early morning, with a 3.9% plunge in mainland Chinese property shares. The broader Chinese market saw a modest dip of 0.3%. In Japan, the Nikkei fell by 0.3%, while South Korea’s Kospi and Taiwan’s benchmark indices lost 0.9% and 0.7%, respectively. Australia’s stock market also declined by 0.4%, mainly due to weakness in commodity stocks after oil and industrial metal prices softened.
On Friday, after Chinese markets closed, the National People’s Congress (NPC) Standing Committee announced a 10 trillion yuan ($1.39 trillion) debt package aimed at alleviating local government financing strains and stabilizing the country’s slowing economic growth. However, the lack of a direct cash injection into the economy disappointed investors, particularly in light of the looming threat of increased tariffs under a potential second Trump administration.
Analysts from Macquarie noted that while the market had hoped for a large fiscal stimulus, the actual measures were focused on achieving economic stability and meeting GDP growth targets rather than revitalizing the economy. They emphasized that China’s policy decisions would primarily address domestic economic conditions, independent of the U.S. election results.
Despite Wall Street’s positive momentum, with the S&P 500 briefly crossing the 6,000-point threshold, Hong Kong stocks took a hit from the stimulus news. U.S. futures indicated a slight 0.2% rise on Monday.
In U.S. political news, the Republican party is on the verge of taking control of both chambers of Congress, with projections showing them capturing the Senate and securing a slim majority in the House. This has raised expectations for tax cuts and deregulation under a potential second term for Trump, which investors believe could benefit equities.
Bitcoin, often seen as part of the “Trump trade,” continued its upward trajectory, reaching a new peak as Trump’s pro-crypto stance gained traction. His pledge to make the U.S. the “crypto capital of the planet” resonated with investors.
The dollar index, which tracks the U.S. currency against six major peers, remained steady at 105.01 after gaining 0.55% on Friday. Traders are now focused on Wednesday’s consumer price index report, which could influence expectations of a rate cut at the Federal Reserve’s next meeting in December. Currently, markets are pricing in a 65% chance of a quarter-point reduction on December 18.
In currency markets, the dollar rose 0.5% to 153.39 yen, rebounding from Friday’s dip, while the euro held steady at $1.0721, not far from a four-month low. Political uncertainty in Germany weighed on the euro, with Chancellor Olaf Scholz hinting at a potential vote of confidence, which could lead to snap elections after his coalition collapsed.
Sterling remained unchanged at $1.2922. Meanwhile, gold prices fell 0.5% to $2,669.69 per ounce, retreating from last month’s record high of $2,790.15. Base metals also saw declines, with copper prices in Shanghai dropping 0.9% to 76,570 yuan per ton.
Oil prices continued to slide, extending Friday’s losses. Brent crude dropped 0.3% to $73.68 a barrel, while U.S. West Texas Intermediate (WTI) futures fell 0.4% to $70.13 a barrel.
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