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Asian stocks slide amid Trump tariff worries, yen gains
Global Banking & Finance Review®
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By Kevin Buckland
TOKYO (Reuters) –Asian stocks fell on Wednesday and currencies were volatile as investors fretted over whether other countries could be targeted for tariffs under incoming U.S. President Donald Trump, a day after he pledged new levies on Canada, Mexico and China.
European equities looked set for a similar fate, with Pan-European STOXX 50 futures losing 0.3%.
Canada’s loonie and Mexico’s peso remained weak following sharp drops to multi-year lows on Tuesday, while China’s yuan edged back towards the previous session’s four-month trough.
However, the New Zealand dollar rebounded from multi-month lows after the country’s central bank opted to cut interest rates by 50 basis points on Wednesday, disappointing some in the market who had bet on a bigger reduction.
The safe-haven yen extended its strong run, climbing to a two-week high on the U.S. dollar, which was in turn weighed down by sagging Treasury yields.
Japan’s Nikkei declined more than 1%. The autos sector was the worst-performing industry group on the Tokyo Stock Exchange, dropping 3.6% as both the threat of tariffs and the drag of a stronger yen weighed on the profit outlook.
Taiwanese stocks lost 1.5%, while South Korea’s KOSPI dropped 0.8%.
However, mainland Chinese blue chips recovered from early losses to rise by 0.7%, while Hong Kong’s Hang Seng added 0.5%.
MSCI’s broadest index of Asia-Pacific shares drooped 0.3%.
Weakness in Asian equities contrasted with gains for all three of the major Wall Street bourses overnight. S&P 500 futures pointed to a flat reopen.
Trump posted on his Truth Social platform early in Asia’s Tuesday that he would immediately put a 25% tariff on all products from Mexico and Canada upon taking office, and slap an additional 10% tariff on goods from China. He said those levies would remain until the countries clamped down on issues such as illicit drugs and migrants crossing U.S. borders.
The theme on the day has been to buy America, and for some to begrudgingly open a Truth Social account, with confirmation that headline risk and the communication channels for price discovery in markets have officially evolved,” said Chris Weston, head of research at Pepperstone.
Compared with Trump’s first time in office, “he is far more prepared, has a clear game plan, and has the legal passage to execute without constraint,” Weston said. “Markets now expect bold action ongoing, with the noise in markets officially increasing even before inauguration.”
The yuan weakened 0.1% to 7.2679 per dollar in offshore trading, heading back toward the low of 7.2730 seen on Tuesday.
The Mexican peso weakened to 20.6980 per dollar, approaching the overnight trough at 20.8350.
Canada’s loonie also edged lower, though at C$1.4076 versus its U.S. peer, there was more cushion from the knee-jerk low of C$1.4178 seen in the previous session.
The U.S. dollar was more mixed against other major rivals, edging up to $1.04765 per euro and easing slightly to $1.2570 against sterling. It slid 0.5% to 152.34 yen, after earlier reaching its weakest since Nov. 8 at 152.25 yen.
U.S. short-term Treasury yields edged lower to 4.2416%, extending this week’s pullback from Friday’s nearly four-month peak at 4.3810%.
Trading across markets is thinner than usual this week with the U.S. Thanksgiving holiday on Thursday, and many investors extending their break into Friday. Traders are also keeping an eye on a reading of the Federal Reserve’s preferred inflation gauge, the PCE deflator, due later on Wednesday.
“We need to remember from (Trump’s) first term, these agenda are changeable depending on how the policy priorities change, and what he can get in terms of the negotiations with various countries,” said Keiko Kondo, head of multi-asset investments for Asia at Schroders, adding that based on the firm’s estimates, nearly 40% of Trump’s promises during his time in office were not delivered.
“We just need to sort of wait and see.”
The New Zealand dollar added 0.5% to $0.58635.
Leading cryptocurrency bitcoin attempted to find its feet after a four-day retreat from a record high of $99,830. It was last up 1.5% at $93,037.
Gold ticked up 0.3% to about $2,640 per ounce.
Oil prices stabilized as markets assessed the potential impact of a ceasefire deal between Israel and Hezbollah, ahead of Sunday’s OPEC+ meeting.
Brent crude futures rose 5 cents to $72.86 a barrel, while U.S. West Texas Intermediate crude futures were at $68.79 a barrel, up 2 cents.
Both benchmarks started the week with declines of more than $2 following multiple media reports that the warring sides had agreed to terms of a ceasefire.
(Reporting by Kevin Buckland; Additional reporting by Tom Westbrook; Editing by Christopher Cushing and Kim Coghill)
Foreign exchange, or forex, refers to the global marketplace for buying and selling currencies. It is essential for international trade and investment.
Economic growth is the increase in the production of goods and services in an economy over time, typically measured by GDP.
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