Asian stocks edged lower on Tuesday as investors weighed a possible win for Republican presidential nominee Donald Trump and its impact on China, while the US dollar continued to gain momentum despite the prospect of interest rate cuts this year.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.46%, extending weakness in the previous session. Japan’s Nikkei 225, on the other hand, rose 0.31% after halting activity on Monday in observation of the Marine Day holiday.
The stumble followed a strong performance on Wall Street, where the blue-chip Dow Jones Industrial (DJI) Average climbed 0.53% to an all-time high of 40,211.72 points, with energy stocks and better-than-expected second-quarter earnings from Goldman Sachs Group Inc. and BlackRock Inc. aiding the surge.
Federal Reserve Chair Jerome Powell also supported US shares after he stated that the three inflation data over the second quarter somewhat supported the case of inflation moving steadily towards their annual 2% target.
Markets now expect the Fed to deliver a quarter-point rate cut in September and 68 basis points (bps) overall by the end of 2024.
The forecasts kept the greenback in check overnight but fueled some buying as several investors see a Trump reelection. The US dollar index jumped 0.14% against its major peers on Tuesday to 104.33.
Trump’s Potential Return Signals Trouble for China
Investors remained watchful of the potential aftermath of the weekend’s Trump rally shooting, which has increased bets on the former US president securing victory in the 2024 elections on November 5.
Trump received official confirmation as his party’s presidential candidate on Monday and announced Ohio Senator JD Vance as his vice-presidential running mate.
Following the selection, Vance said China poses the ‘biggest threat’ to the US, signaling a potentially aggressive position the Trump administration may take should they be reelected to the White House.
Vance’s hawkish stance towards Beijing in a bid to better US trade deals will only weaken sentiment in China, according to head of research Chris Weston.
Chinese stocks were trading lower on Tuesday, having observed improved selling the day prior.
The Shanghai Composite index dropped 0.35%, while Hong Kong’s Hang Seng slipped 1.56% after losing 1.50% in the earlier session, as the world’s second-largest economy grew below estimates at 4.7% in the second quarter to miss its 5.0% expansion goal.
The reading further raised concerns over China being unable to meet its growth target this year, which may prevent Beijing from employing forceful stimulus.
