Written by Jamie McGeever
(Reuters) – Future outlook for the Asian market.
Signs that China’s economy is returning to life and Wall Street’s strong gains on Friday bode well for Asian markets on Monday, but tensions surrounding President-elect Donald Trump’s inauguration could dampen optimism. There is.
With U.S. markets closed for Martin Luther King Jr. Day, global liquidity is lower than usual and concerns about the U.S. debt ceiling are once again in the spotlight. Perhaps there are further reasons for Asian investors to tread carefully.
Investors have broadly welcomed the “market-friendly” parts of Trump’s anticipated agenda, such as tax cuts and deregulation. But other parts, such as tariffs and mass deportations, could reignite inflation and slow the Fed’s pace of rate cuts.
Additionally, high interest rates for an extended period of time could hurt growth and raise concerns about “stagflation,” making the Fed’s job even more difficult. His inaugural address is likely to include policy pledges, directives and executive orders that move markets.
In that context, the story surrounding TikTok is being closely watched for clues about President Trump’s policy decisions and approach to China. His latest position is that he wants an executive order after he takes office to restore access to Chinese-owned social media apps in the United States, but for them to be at least half-owned by American investors.
Back in the market, the dollar and U.S. Treasury yields have fallen from historic highs on Monday and ended last week lower, a welcome easing of financial conditions for Asia and emerging markets.
The 10-year Treasury yield hit a 16-month high of 4.80%, but fell 17 basis points for the week, and the dollar index hit a 27-month high, marking its second weekly decline in 16 weeks. It was the second time.
The catalyst appears to have been relatively tame U.S. inflation data and dovish comments from Fed Chairman Christopher Waller, who floated the idea of ​​three or four quarter-point rate cuts this year.
Last week, the S&P 500 rose 3%, its best week in a decade. The Nasdaq rose 2.4% and the MSCI World rose 1.7%. However, Asian stocks underperformed. The MSCI Asia ex-Japan index rose 0.8%, Chinese stocks rose just 0.3%, while Japan’s Nikkei Stock Average fell.
China’s “data dump” last week was more encouraging than analysts expected. Overall growth in the fourth quarter was 5.4%. This means that the Chinese government has achieved its annual GDP growth target of approximately 5%.
The People’s Bank of China will decide on interest rates on Monday. Policies are expected to be eased slowly and cautiously in the first quarter of this year, but this does not necessarily mean they will start on Monday.
