Asian Stocks Follow US Gains, Treasuries Drop: Markets Wrap

This content was published on December 2, 2024 - 03:35

5 minutes

(Bloomberg) — Asian stocks rose for a second day, following gains on Wall Street Friday. The dollar strengthened after President-elect Donald Trump told BRICS nations not to create a currency to rival the greenback.

The MSCI gauge of Asian equities added to last week’s rally, with Taiwan and Hong Kong shares among the biggest gainers. The euro and French bond futures slipped after far-right leader Marine Le Pen gave the strongest indication yet that she’s prepared to topple the government in Paris as soon as this week.

Treasuries dropped as traders looked to US data to gauge a potential for future Federal Reserve interest-rate cuts and digested comments from Bank of Japan Governor Kazuo Ueda on a potential hike.

“Trump is using tariffs as a bargaining tool to achieve various economic policy objectives,” said Sonal Varma, chief economist for India and Asia ex-Japan at Nomura Holdings Inc. “The BRICS currency idea is still in the early stages, and member nations have various priorities at this stage. If implemented, the tariffs will also be negative for US consumers due to higher imported inflation.”

The prospect of quicker US inflation and trade tariffs once Donald Trump returns to the White House has boosted the dollar at the expense of other assets in recent weeks, reducing the likelihood of some central banks lowering interest rates as much as earlier envisioned.

Emerging market assets including China’s yuan and South African rand may face volatility after Trump warned the BRICS nations he will require a commitment that they won’t create a new currency, or favor another in a bid to displace the US dollar in global trade. Should they not meet Trump’s demands, he threatened to lob 100% tariffs on their goods entering the US.

“The outside external risk remains to be this Trump presidency being a very big uncertainty and obviously how that moves US yields, which is another big driver for EM,” said Ben Luk, a strategist at State Street Global Markets. “A lot of that is not really priced in for emerging markets yet.”

The euro dropped as much as 0.5% in early Asian trade after French Finance Minister Antoine Armand said on Sunday the country won’t accept artificial budget deadlines from Marine Le Pen. The French far-right leader has told the prime minister he needs to make tweaks to his 2025 budget by Monday, which is when opposition lawmakers are expected to initiate the process to call the vote of no-confidence.

US 10-year yields rose five basis points to 4.22% after tumbling a quarter percentage point last week. Investors are looking ahead to a crucial jobs report and remarks from Fed Chair Jerome Powell for clues on whether the central bank will cut rates for a third consecutive time at a meeting this month.

BOJ’s Ueda said interest-rate hikes are “nearing” as inflation and economic trends develop in line with the central bank’s forecasts. The Japanese currency surged more than 3% last week as bets on a December rate hike rose following data showing inflation in Tokyo accelerating more than expected. The currency weakened 0.5% Monday.

In commodities, oil rose in early trading amid heightened Middle East tensions.

Key events this week:

Eurozone Eurozone Manufacturing PMI, unemployment, Monday
UK S&P Global/CIPS UK Manufacturing PMI, Monday
FT Global Banking Summit in London through Dec. 4, Tuesday; BOE Governor Andrew Bailey will be a panelist
China Caixin services PMI, Wednesday
Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
ECB President Christine Lagarde appears before European Parliament committees, Wednesday
Fed Chair Jerome Powell speaks, Wednesday
OECD publishes economic outlook, Wednesday
Eurozone retail sales, Thursday
Germany factory orders, Thursday
OPEC and non-OPEC ministerial meeting, Thursday
India rate decision, Friday
Eurozone GDP, Friday
US unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks