Asian Stocks Rise as Trump, Xi Discuss Trade: Markets Fall

(Bloomberg) — Asian stocks rose, along with their U.S. counterparts after a positive conversation between Donald Trump and Xi Jinping raised hopes of an easing of tensions between the United States and China .

Stocks rose in Australia and Japan, while those in Hong Kong and mainland China also opened higher. The index of U.S.-listed Chinese stocks jumped 3.2% on Friday, as Trump described pre-inauguration talks between the two leaders as very good. U.S. futures were slightly lower in Asia as Wall Street was closed Monday for a public holiday.

That optimism came after 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 cheerier mood, TikTok began restoring service in the United States on Sunday, as Trump announced 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. Particularly telling is that Asian indexes are expected to open stronger today on this news, after barely moving 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.

Elsewhere, Chinese banks kept their key prime rates unchanged, as forecast by 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.

Later in the week, attention will now shift to the Bank of Japan's planned policy decision on Friday, with around 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, with the largest token Bitcoin down 3.5% 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 growing 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.

In the commodities sector, oil was flat ahead of President-elect Donald Trump's inauguration, as the market braced for a period of uncertainty and turmoil at the start of his second term in the White House.

Key events this week:

• Annual World Economic Forum in Davos begins Monday
• Donald Trump will be sworn in as the 47th President of the United States on Monday
• Jobless claims in the United Kingdom, unemployment, Tuesday
• Canadian CPI, Tuesday
• New Zealand CPI, Wednesday
• CPI in Malaysia, rate decision, Wednesday
• Retail sales in South Africa, CPI, Wednesday
• ECB President Christine Lagarde and other officials speak in Davos on Wednesday.
• South Korea's GDP on Thursday
• Euro zone consumer confidence, Thursday
• Turkey rate decision on Thursday
• Norway rate decision on Thursday
• Retail sales in Canada, Thursday
• Trump to join World Economic Forum for online dialogue
• CPI in Japan, rate decision, Friday
• India, Eurozone, UK PMIs, Friday
• ECB President Christine Lagarde and BlackRock CEO Larry Fink speak in Davos on Friday.

Some of the main market movements:

Actions

• S&P 500 futures fell 0.1% as of 10:30 a.m. Tokyo time
• Nikkei 225 (OSE) futures rose 1.3%
• The Japanese Topix rose 1.3%
• Australia's S&P/ASX 200 index rose 0.3%
• Hong Kong Hang Seng rose 1.1%
• The Shanghai Composite rose 0.4%
• Euro Stoxx 50 futures unchanged

Currencies

• Bloomberg Dollar Spot Index little changed
• The euro was little changed at $1.0282
• The Japanese yen rose 0.2% to 156.03 per dollar
• The offshore yuan was little changed at 7.3358 per dollar.

Cryptocurrencies

• Bitcoin fell 3.3% to $100,120.07
• Ether fell 1.3% to $3,187.73

Bonds

• The yield on 10-year Treasury bills changed little at 4.63%
• Australia's 10-year yield rose a basis point to 4.51%

Raw materials

• West Texas Intermediate crude rose 0.2% to $78 a barrel
• Spot gold fell 0.4% to $2,693.34 an ounce

This story was produced with the help of Bloomberg Automation.

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