(Bloomberg) — Asian stocks rose along with European and U.S. stock futures, as investors brace for a second Donald Trump presidency and an expected interest rate cut from the Federal Reserve.
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Chinese stocks were among the best performing stocks in Asia thanks to optimism that Beijing will introduce more stimulus measures, and encouraging export data. That was after the S&P 500 rose 2.5% on Wednesday, its best post-election day in history, and the Nasdaq 100 advanced 2.7%. The Federal Reserve is expected to cut its key interest rate by a quarter point on Thursday.
The rise in US stocks reflects expectations that Trump’s policy agenda favoring lower taxes and less regulation may support corporate profits. Meanwhile, 10-year Treasury yields rose 16 basis points on Wednesday on expectations that the president-elect’s fiscal plans and proposed tariff hikes will boost inflation and weaken the Fed’s ability to cut interest rates.
“After digesting Trump’s presidential win, investors in Asia are now focusing on China’s impending stimulus announcements,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong. “Hopes are rising that China may unveil a major financial package in the coming days, providing a major boost to its battered economy.”
The yen strengthened after Atsushi Mimura, Japan’s top currency official, said authorities would take appropriate measures against excessive currency movements. The currency fell about 2 percent on Wednesday as the dollar rose after Trump’s victory.
The Bloomberg Dollar Index in Asia fell after jumping about 1.3% on Wednesday. 10-year Treasury yields fell one basis point to 4.43%.
China’s CSI 300 index rose more than 2% after falling in early trading. Consumer and real estate stocks rose as traders bet that Beijing will shift its focus toward boosting domestic demand to offset any negative impact from Trump’s return to the White House.
Chinese export growth rose in October at the fastest pace in more than two years, continuing months of resilience that helped sustain the economy ahead of a barrage of stimulus measures aimed at supporting domestic demand.
“It is very likely that we will see further fiscal and monetary stimulus from Beijing, which could offset some of the trade headwinds,” said David Chow, global market strategist at Invesco in Singapore. “All eyes are on what might emerge from China’s policy toolkit after the conclusion of the Standing Committee meeting of the National People’s Congress on November 8.”
Chinese regulators have asked Chinese banks to lower the interest rates they pay on demand deposits from other financial institutions in a move to free up idle money to boost the economy, according to people familiar with the matter.
Yield spreads on investment-grade Asian dollar bonds narrowed to a record low, with bond yield premiums falling by at least one basis point, according to credit traders. Spreads narrowed to 73 basis points on Wednesday, then the lowest based on data compiled by Bloomberg dating back to 2009.
Fed decision
Fed officials are widely expected to cut interest rates by 25 basis points at the end of their two-day meeting, a move that would follow a half-point cut in September. They expected another quarter-point cut this year, in December, and an additional full point of cuts in 2025, according to the median estimate released in September.
“What investors really want to know is: How President-elect Donald Trump’s proposed fiscal and tariff policies will impact the FOMC’s interest rate outlook,” Anna Wong, a Bloomberg economist, wrote in a research note. “FOMC participants are likely grappling with this very question.”
Wall Street’s “fear gauge” – the VIX – fell on Wednesday by the most since August. Nearly 19 billion shares changed hands on U.S. exchanges, 63% higher than the daily average in the past three months.
Bitcoin, seen by many as Trump’s so-called trade after he embraced the digital asset during his campaign, fell on Thursday after rising to a record high the day before. Oil rose after a volatile session on Wednesday as traders assessed the potential impact of Trump’s election victory on the crude oil market.
Main events this week:
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Chinese trade, foreign exchange reserves, Thursday
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Bank of England interest rate decision, Thursday
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Federal interest rate decision, Thursday
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Consumer confidence index from the University of Michigan, Friday
Some key movements in the markets:
Stocks
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S&P 500 futures rose 0.2% as of 3:44 p.m. Tokyo time
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S&P/ASX 200 futures were little changed
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Japan’s Topix index rose 1%.
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The Hang Seng Index in Hong Kong rose 1.5%.
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The Shanghai Composite Index rose 2.3%.
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Euro Stoxx 50 futures rose 0.4%.
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%.
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The euro rose 0.2 percent to $1.0747
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The Japanese yen rose 0.4 percent to 154.05 yen to the dollar
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The yuan in external transactions rose 0.2 percent to 7.1898 per dollar
Cryptocurrencies
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Bitcoin fell 1.9% to $74,522.99
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Ether rose 3.7% to $2,788.33
Bonds
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The yield on 10-year Treasury bonds was little changed at 4.43%.
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The yield on 10-year Japanese bonds rose by 2.5 basis points to 1.005%.
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The 10-year Australian bond yield rose one basis point to 4.64%.
Goods
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West Texas Intermediate crude rose 0.2% to $71.86 a barrel
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Gold in spot transactions fell 0.1 percent to $2,655.93 per ounce
This story was produced with assistance from Bloomberg Automation.
–With assistance from Richard Henderson, Heidi Lunn, Finbar Flynn, and Winnie Hsu.
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