Asian stock markets exhibited a mixed performance on Wednesday as uncertainty loomed over Chinese markets, fueled by recent comments from U.S. President Donald Trump regarding tariffs.
Initially, investors in Asia showed signs of relief earlier in the week when Trump decided against immediately enforcing significant tariffs on China. However, on Tuesday, he indicated he was contemplating a 10% tariff on Chinese imports due to concerns surrounding the smuggling of fentanyl into the U.S. from China via Mexico and Canada.
In Hong Kong, the Hang Seng Index declined by 1.1%, settling at 19,888.12, while the Shanghai Composite Index fell 0.7% to reach 3,805.78. Conversely, in Tokyo, the Nikkei 225 index rose by 1.5% to 39,604.71, following Trump’s announcement of a joint initiative aimed at investing up to $500 billion in artificial intelligence infrastructure. This news greatly benefitted Softbank Group Corp., whose shares jumped by 8.9% on Wednesday.
Taiwan’s Taiex index also experienced a boost, rising 1.4% after the announcement, with Taiwan Semiconductor Manufacturing Corp. shares increasing by 2.7%. Likewise, South Korea’s Kospi index saw a 0.7% increase, reaching 2,535.30, while Australia’s S&P/ASX 200 climbed 0.3% to 8,428.70.
Meanwhile, U.S. futures were on the rise, although oil prices showed a mixed trend. The previous day, the S&P 500 saw an uptick of 0.9%, hitting 6,049.24, as global markets appeared to take cautious steps in response to Trump’s return to the White House. The Dow Jones Industrial Average also rose by 1.2% to 44,025.81, while the Nasdaq composite increased by 0.6% to 19,756.78.
Trump has made his intentions clear regarding significant changes to global trade dynamics and U.S. economic policies, often positioned to benefit the U.S. at the potential detriment of other nations. Consequently, stock indexes in both Asia and Europe moved only slightly. In the bond market, U.S. Treasury yields moderated, undoing some of their notable gains that had previously intensified pressure on worldwide stock markets, while bitcoin corrected from its previous records.
In the foreign exchange arena, both the Mexican peso and Canadian dollar weakened against the U.S. dollar following Trump’s declaration of intentions to implement 25% tariffs on Canada and Mexico effective February 1. The looming threat of extensive tariffs, coupled with other measures that could amplify government debt, had recently propelled Treasury yields upward, contributing to stock price declines. To counteract this downward trend, companies are increasingly required to report stronger earnings to maintain their stock valuations.
The bond market saw a retreat in Treasury yields, which had risen in response to persistent inflation concerns. The 10-year Treasury yield decreased from 4.62% to 4.56% from late Friday. The bond market had remained closed on Monday in observance of Martin Luther King Jr. Day. Despite a slight regression following optimism regarding inflation, the 10-year yield remains significantly higher than its September value of below 3.65%.
Strategist Michael Wilson from Morgan Stanley noted that fluctuations in long-term interest rates continue to drive the broader U.S. stock market. He anticipates ongoing patterns, where stock prices dip when yields increase and rise when yields fall, at least until the 10-year Treasury yield sustains itself below 4.50%, among other factors.
In the cryptocurrency sector, which has seen a resurgence amid expectations of a friendlier stance toward the industry from the Trump administration, bitcoin pulled back from its record high above $109,000 reached on Monday, trading at $105,742 on Wednesday, as reported by CoinDesk.
Benchmark U.S. crude oil priced dropped by 6 cents to $75.77 a barrel early Wednesday, while Brent crude increased by 3 cents to $79.32 a barrel. The U.S. dollar appreciated against the Japanese yen, rising to 155.85 from 155.46 yen. Meanwhile, the euro slipped to $1.0413 from $1.0433.
