By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
The first full day of financial market trading in U.S. President Donald Trump’s second term in office is set to get off to a strong start on Tuesday, with Trump’s seemingly more measured approach to tariffs giving investor sentiment an instant shot in the arm.
Trump issued a broad trade memo on Monday that stopped short of immediately imposing new tariffs on key trading partners, something he had previously indicated he would do on his first day in office. Instead, trade relationships with China, Canada and Mexico will be assessed and reviewed before he decides what steps to take.
The U.S. stock and bond markets were closed for Martin Luther King Jr. Day on Monday, but FX markets were open, and the dollar’s steep fall across the board reflected the relief among investors that Trump appears to be dialing down the tariff rhetoric in favor of a less belligerent approach.
Even if it turns out to be only temporary.
The dollar index slumped 1%, its biggest decline since August. The dollar may have been primed for a fall, going by hedge fund positioning – the latest Commodity Futures Trading Commission data shows funds last week held a net long dollar position against a range of currencies worth $35 billion last week, the biggest in nine years.
The dollar had rallied around 10% since September alongside the surge in U.S. Treasury yields of more than 100 basis points, a tightening of financial conditions that hit Asian and emerging markets particularly hard. A pause or reversal should ease that squeeze.
U.S. stock futures are pointing to gains of around 0.4% on Wall Street on Tuesday. Asian markets were already on the front foot on Monday, with the MSCI Asia ex-Japan and Nikkei 225 indexes both rising more than 1%.
Markets around the world will be sensitive to the deluge of headlines that’s likely to flow from Washington in the coming days as the new administration announces policy directives and executive orders. It is shaping up to be a volatile week.
Crude oil prices dipped further from last week’s six-month high, falling for a third straight day as traders await details on Trump’s executive order declaring a national energy emergency and promise to fill up strategic reserves.
Cryptocurrencies, on the other hand, were more buoyant as the self-styled “crypto President” was sworn in and bitcoin leaped to a new high just shy of $110,000.
The Asian economic calendar on Monday is light, with producer price inflation from South Korea and consumer price inflation from Hong Kong the only major economic indicators on tap. Expect markets to take their cue from headlines out of Washington, the upturn in global stocks, and the diving dollar.
Here are key developments that could provide more direction to markets on Tuesday:
– Reaction to Trump’s first day in office
– South Korea PPI (December)
– Hong Kong CPI (December)