World Economy

Asian Shares Rattled by Trump Policy Concerns

Investors are becoming worried as it appears as if Trump was setting fire to geopolitical risks that already exist
The Tokyo Stock ExchangeThe Tokyo Stock Exchange

Asian shares slipped on Tuesday as stringent curbs on travel to the United States ordered by President Donald Trump brought home to investors that he is serious about carrying out his controversial campaign pledges.

Global stocks posted their biggest loss in six weeks on Monday after Trump signed an executive order to bar Syrian refugees indefinitely and suspend travel to the United States from seven Muslim-majority countries, sparking widespread protests, Reuters reported.

“Investors are becoming worried as it appears as if he was setting fire to geopolitical risks that already exist,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

Trump’s move drew criticism from some US policymakers, and business leaders, with technology companies, which depend on talent from around the world, planning to discuss a legal challenge.

“His stance is really inward-looking, making investors nervous about his ‘moderateness’,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5% while Japan’s Nikkei dropped 1.7%, its biggest fall in almost three months.

On Monday, the US S&P 500 Index fell 0.6%, its biggest fall in a month, though it remained well above levels seen before the Nov. 8 presidential election.

MSCI’s gauge of the world’s 46 stock markets shed 0.6%, its largest loss in a month and a half.

US stock futures shed 0.3% on Tuesday and the dollar extended losses against the yen.

Still, most share prices were up on the month, supported by signs of accelerating momentum in the global economy and hopes of large fiscal stimulus from Trump.

MSCI’s ex-Japan Asian shares index was up 5.7% this month while its index of world markets was up 2.5%. They were also higher than their levels before the US elections.

In the currency market, the dollar was broadly weak and fell 0.3% against the yen to 113.49 yen. It was down 3.1% so far this month, after three straight months of sizable gains.

The Japanese currency showed no reaction after the Bank of Japan kept its policy on hold, as expected. A string of recent data has suggested the economy is slowly regaining traction.

The euro edged up to $1.071, consolidating after its rebound this month from its 14-year low of $1.034 set on Jan. 3.

  European Shares Gain

European shares headed for their third straight month of gains on Tuesday, underpinned by a rally in British online supermarket Ocado and Swedish engineer Alfa Laval after encouraging earnings updates.

The pan-European STOXX 600 index was trading flat, after falling more than 1% on Monday. It has gained around 0.5% so far in January after rising in the previous two months.

Ocado shares were more than 9% higher, the top gainer on the index, after reporting a 3.3% rise in full-year core earnings and saying that it was well positioned for growth.

In a possible sign of increased anxiety among investors, the safe-haven Swiss franc strengthened to a seven-month high of 1.063 franc per euro on Monday.

French bond yields rose to the highest level since September 2015, on rising uncertainty over the presidential election later this year.

Italian debt yields climbed to 1 1/2-year highs partly as early elections could be called following a ruling from the country’s constitutional court last week.

By contrast, the yield on German debt fell even as data showed inflation in Germany hit a 3 1/2-year high in January.

News that Germany posted a national inflation rate of 1.9% stoked talk of an unwinding of monetary stimulus by the ECB, even though the inflation outcome was below expectations.

Elevated uncertainty about Trump’s policies, including a lack of detail so far on his plans for tax cuts and fiscal spending, offset optimism on the US economy.

Data on Monday showed US consumer spending accelerated in December while inflation showed some signs of picking up last month.

The core PCE price index, the Federal Reserve’s preferred inflation measure, rose 1.7% on a year-on-year basis after a similar gain in November.

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