Asian shares fall as investors ponder US-China equation post Trump win

Asian shares fell on Tuesday as investors pondered the prospect of a Trump victory and what that would mean for China, while the dollar climbed for a second day even though dovish Fed comments fuelled bets of more US rate cuts this year.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent, having eased 0.3 per cent on Monday. Japan returned from a public holiday, with the Nikkei index up 0.4 per cent.

Overnight, investors continued to digest the fallout from the attempted assassination on Saturday of former US President Donald Trump, who is favourite to win the White House in November and who on Monday nominated his vice presidential running mate J.D. Vance.

 

Wall Street closed higher, with the Dow Jones notching an all-time closing high thanks to energy and banking shares. Bitcoin jumped 6 per cent, gold climbed towards a record high and the yield curve steepened as investors favoured so called Trump-victory trades.

"J.D. Vance sits in the camp of taking China on head-first in a bid for improved trade deals for the US, and this will only weigh on sentiment towards China, where we saw better selling in China equity yesterday," said Chris Weston, head of research at Pepperstone.

The Shanghai Composite index fell 0.3 per cent, while Hong Kong's Hang Seng index lost 1.4 per cent, having already dropped 1.5 per cent the day before soft economic data from China heightened the risk that Beijing could miss its 5 per cent growth target this year, barring forceful stimulus.

Also cheering Wall Street, Fed Chair Jerome Powell said on Monday the three US inflation readings over the second quarter do "add somewhat to confidence" that inflation is returning to the Fed's target in a sustainable fashion.

Markets have now fully priced in a quarter-point rate cut from the Fed in September, with a total easing of 68 basis points expected by the end of the year.

That kept a lid on the US dollar overnight, although it has attracted buying interest as some investors bet on a Trump victory. The dollar index firmed 0.1 per cent on Tuesday against a basket of major currencies to 104.34.

It rose 0.3 per cent on the Japanese yen to 158.55 per dollar, which is struggling to hold onto the gains after Tokyo's suspected intervention in the market last week.

"I actually have bought dollars here. I think the US dollar has probably bottomed for now," said Tony Sycamore, analyst at IG. "We've had the reaction out of the soft CPI data and the dovish Powell. And I think the risks to the dollar to the upside here."

"The idea the Trump administration is more likely to get to the White House and increase tariffs on China, that's not a good thing at all for Chinese stocks. Put that together with the higher US dollar and higher yields, I think it's going to be a tough time for Hang Seng."

Long-term Treasuries found their footing in Asia, with the 10-year yield off 1.5 basis points to 4.2138 per cent, having risen four basis points overnight.

In commodity markets, gold rose 0.2 per cent to $2,426.18 an ounce, nearing a two-month high. [GOL/]

Oil prices ticked down on worries about a slowing Chinese economy crimping demand. [O/R]

Brent futures fell 0.2 per cent to $84.72 a barrel, while US West Texas Intermediate (WTI) crude also slipped 0.2 per cent to $81.77.
 

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