Asian Stocks Gain as Trump-Xi Call Fuels Optimism: Markets Wrap

(Bloomberg) — Asian shares climbed after a conversation between Donald Trump and Xi Jinping raised hopes for easing US-China tensions. 

Equities advanced in regional markets from Australia to Japan and China after Trump described the pre-inauguration talk between the two leaders as “very good.” European and US futures were steady, with Wall Street closed on Monday for a holiday.

A gauge of the dollar slipped, extending last week’s decline after snapping a six-week rally. 

The stronger appetite for risk assets in Asia came after Trump and Xi discussed trade, TikTok and fentanyl, which may set the tone for relations in the early days of the new administration. Adding to the brighter mood, TikTok started restoring service in the US on Sunday as Trump said he would halt enforcement of a law requiring the app’s Chinese owner to find a buyer for three months.

Whether the momentum can continue hinges on how quickly Trump will implement his policies ranging from lower taxes to higher tariffs and tighter immigration control, the inflationary impact of which may keep the dollar strong and Treasury yields elevated. His stance on issues including the tech rivalry with China and climate change also will likely affect investment decisions on sectors from semiconductors to electric vehicles, and shipbuilding.

 

“What sets the tone for us in Asia is that Trump himself has said he’s got a very good phone call with President Xi Jinping,” Heng Koon How, head of markets strategy at United Overseas Bank, told Bloomberg TV. “Hopefully that sets a much more constructive tone between the United States and China.” 

The president-elect is said to be planning a flurry of executive orders around immigration, energy, federal workers and regulatory reform in the early hours after his Jan. 20 inauguration, part of a sweeping effort to quickly implement his policy agenda upon taking office.

Among the array of actions will be a move to invoke emergency powers as part of his plan to unleash domestic energy production while seeking to reverse President Joe Biden’s actions to combat climate change, according to people familiar with the matter.   

Trump’s combination of pro-growth and protectionist policies have prompted analysts to predict a less dovish Federal Reserve, a strengthening dollar and weakness in bonds. For one, Nomura Holdings Inc. has joined T. Rowe Price in seeing a chance of 10-year Treasury yields rising to 6% this year, while a small group of bond traders believe the US central bank’s next move on interest rates will be to increase them, contrary to the majority view that rates will be cut.

Elsewhere, Chinese Vice President Han Zheng met billionaire Elon Musk and other US business figures, underscoring Beijing’s efforts to set a positive tone in ties with the US before Trump returns to office.

Meanwhile, Chinese banks kept their key loan prime rates unchanged, as expected by Bloomberg Intelligence. 

The World Economic Forum’s annual meeting gets underway later Monday. Among the group of billionaires set to join the pilgrimage of the rich and powerful to Davos, Switzerland are Larry Fink, Ray Dalio and Marc Benioff. Trump will speak virtually to the gathering three days after his inauguration.

Later in the week, the focus will shift toward the Bank of Japan’s scheduled policy decision on Friday, with about three quarters of economists in a Bloomberg survey expecting it to hike its key rate.

BOJ officials also see a good chance of a rate increase as long as Trump doesn’t trigger too many immediate negative surprises, Bloomberg reported on Thursday, citing people familiar with the matter. 

“I think there’s a high probability that the BOJ will move the trigger on rates,” said Mahjabeen Zaman, head of FX research at Australia & New Zealand Banking Group, told Bloomberg TV. “All the economic data in Japan that’s been coming out fully support a rate hike – if not now, very soon.”

In commodities, oil was steady ahead of the inauguration of President-elect Donald Trump, as the market braced for a period of uncertainty and turmoil at the start of his second term in the White House.

Key events this week: 

• The annual World Economic Forum in Davos begins, Monday
• Donald Trump to be sworn in as 47th president of US, Monday
• UK jobless claims, unemployment, Tuesday
• Canada CPI, Tuesday
• New Zealand CPI, Wednesday
• Malaysia CPI, rate decision, Wednesday
• South Africa retail sales, CPI, Wednesday
• ECB President Christine Lagarde and other officials speak at Davos, Wednesday
• South Korea GDP, Thursday
• Eurozone consumer confidence, Thursday
• Turkey rate decision, Thursday
• Norway rate decision, Thursday
• Canada retail sales, Thursday
• Trump will join the World Economic Forum for an online “dialogue”
• Japan CPI, rate decision, Friday
• India, euro area, UK PMIs, Friday
• ECB President Christine Lagarde and BlackRock CEO Larry Fink speak at Davos, Friday

Some of the main moves in markets: 

Stocks

• S&P 500 futures were little changed as of 4:07 p.m. Tokyo time
• S&P/ASX 200 futures were little changed
• Hong Kong’s Hang Seng rose 1.8%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.0308
• The Japanese yen was little changed at 156.25 per dollar
• The offshore yuan rose 0.2% to 7.3270 per dollar

Cryptocurrencies

• Bitcoin rose 5.2% to $108,918.39
• Ether rose 6.1% to $3,426.18

Bonds

• The yield on 10-year Treasuries was little changed at 4.63%
• Australia’s 10-year yield declined two basis points to 4.48%

Commodities

• West Texas Intermediate crude fell 0.1% to $77.80 a barrel
• Spot gold rose 0.2% to $2,709.15 an ounce

This story was produced with the assistance of Bloomberg Automation.

(An earlier version of this story corrected a reference to Fed forecasts in the ninth paragraph.)

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