Asian Markets Slide As Trump Trade Momentum Wanes

Hong Kong: Asian stocks on Wednesday followed Wall Street lower as momentum cooled for the torrid “Trump trade” that swept US markets following Donald Trump’s presidential victory.Japan’s benchmark Nikkei 225 slipped 1.7 per cent to 38,719.60, as wholesale inflation reached its highest level since July of last year.

The corporate goods price index, which measures the price changes of goods traded in the corporate sector, rose 3.4 per cent in October year-over-year, according to Bank of Japan data. The increase was partly attributed to the decline of the Japanese yen against the US dollar. South Korea’s Kospi lost 2.6 per cent to 2,417.16. Samsung Electronics shares fell by 4.5 per cent in Wednesday trading, reaching their lowest level in over four years. Hong Kong’s Hang Seng dropped for a fourth day, declining 0.6 per cent to 19,721.10. The Shanghai Composite gained 0.3 per cent to 3,431.82. Australia’s S&P/ASX 200 fell 0.8 per cent to 8,193.40.

US futures dropped while oil prices were higher. On Tuesday, the S&P 500 slipped 0.3 per cent to 5,983.99, a day after setting its latest all-time high. The Dow Jones Industrial Average dropped 0.9 per cent to 43,910.98, and the Nasdaq composite fell 0.1 per cent to 19,281.40. Stocks had been broadly rising since last week on expectations that Trump’s preference for lower tax rates and other policies may mean faster economic growth, as well as bigger US government debt and higher inflation. Some areas of the market rocketed on particularly high-grade fuel, such as smaller US stocks seen as benefiting the most from Trump’s “America First” ideas. They gave back some of their big gains Tuesday, and the Russell 2000 index of smaller companies fell a market-leading 1.8 per cent.

Even Tesla, which is run by Trump’s ally Elon Musk, sank. It dropped 6.1 per cent for its first loss since before Election Day. A jump in Treasury yields also added pressure on the stock market, as trading of US government bonds resumed following Monday’s Veterans Day holiday. The yield on the 10-year Treasury jumped to 4.42 per cent on Tuesday from 4.31 per cent late Friday, which is a notable move for the bond market.

Treasury yields have been climbing sharply since September, in large part because the US economy has remained much more resilient than feared. The hope is that it can continue to stay solid as the Federal Reserve continues to cut interest rates in order to keep the job market humming, now that it’s helped get inflation nearly down to its 2 per cent target. Some of the rise in yields has also been because of Trump. He talks up tariffs and other policies that economists say could drive inflation and the US government’s debt higher.

That puts upward pressure on Treasury yields and could hinder the Fed’s plans to cut interest rates. While lower rates can boost the economy, they can also give inflation more fuel.