Asian stocks advance as Donald Trump and Xi Jinping discuss trade

Asian stocks rose in early trading Monday, following their U.S. counterparts following a positive conversation between Donald Trump and Chinese leader Xi Jinping ahead of the U.S. president-elect's inauguration.

Stocks in Australia, Japan and South Korea rose. The index of U.S.-listed Chinese stocks jumped 3.2% on Friday, as Trump described the talks between the two leaders as very good. U.S. futures were slightly lower in Asian trading as Wall Street was closed Monday due to a public holiday.

Trump and Xi discussed trade, TikTok and fentanyl, which could set the tone for relations in the first days of the new administration. Adding to the positive sentiment, TikTok began restoring service in the United States on Sunday, as Trump said he would cease enforcement of a law requiring the app's Chinese owner to find a buyer for three months.

The amicable call between Trump and Xi, while only a temporary reprieve amid irrevocable strategic competition, provides additional fuel to reignite the uptrend in stocks, Kyle Rodda said , senior analyst at Capital.com in Melbourne. It's particularly telling that Asian indices are expected to open stronger today on this news, having barely moved after much stronger-than-expected Chinese growth data on Friday.”

Still, traders are bracing for the early days of Trump's second term. He plans a series of executive orders regarding immigration, energy, federal workers and regulatory reform, to quickly implement his policy agenda upon taking office. The plans would include tightening border crossing restrictions and establishing mechanisms to carry out mass expulsions.

Financial markets are expected to be volatile in the coming weeks as they absorb the details of the new administration's policies, Barclays analysts including Ajay Rajadhyaksha wrote in a note to clients. Around a hundred decrees from the first day on areas as vast as border policy, customs tariffs, energy, deregulation, etc. may leave investors scrambling to decipher them. »

Before Trump's inauguration on Monday, Chinese commercial banks will announce their prime rates for one- and five-year loans, as the world's second-largest economy suffers from chronic weakness in domestic demand. The rate will likely be held for a third straight month as the People's Bank of China may be reluctant to cut its key short-term rates due to pressure on the yuan, according to Bloomberg Intelligence.

The annual meeting of the World Economic Forum will begin later Monday. Among the group of billionaires expected to join the pilgrimage of the rich and powerful to Davos, Switzerland are Larry Fink, Ray Dalio and Marc Benioff. Trump will address the assembly virtually three days after his inauguration.

Traders will also be bracing for the Bank of Japan's planned policy decision on Friday, with about three-quarters of economists surveyed by Bloomberg expecting it to raise its key rate. Overnight index swaps have shown up to a 99% chance of upside.

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

Trump Memecoin

A digital token launched by Trump has shaken up the cryptocurrency market, attracting billions of dollars in trading volume while stoking concerns about conflicts of interest.

Meanwhile, the broader crypto market has struggled, including a decline in the largest token, Bitcoin. It was down more than 2% on Monday.

The greenback's Bloomberg gauge has risen more than 5% in the 10 weeks since Election Day, finally halting its six-week rally on Friday. The progress was similar to that seen after Trump's victory in 2016. The move was driven by corresponding weakness in global currencies seen as threatened by Trump's economic policies, including the euro and the Canadian dollar.

The Chinese yuan has also lost more than 3% against the dollar since November 5, due to tariff risks and the widening gap between U.S. and Chinese government bond yields. The People's Bank of China has deployed various tools to support the currency, and expectations for depreciation have been reduced since peaking in early December.

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