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(Bloomberg) -- Asian stocks may struggle in early trading after Chinese stimulus measures underwhelmed and data over the weekend showed persistent deflation risks. Bitcoin topped $80,000 after President-elect Donald Trump took a clean sweep of the seven US battleground states.
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Equity futures from Sydney to Tokyo and Hong Kong signaled losses on Monday after China’s 10 trillion yuan ($1.4 billion) plan to help local governments deal with hidden debt stopped short of including new measures to boost domestic demand. The S&P 500 rose 0.4% on Friday as US stocks capped their best week this year in anticipation of Trump’s pro-growth agenda.
A softer start is expected in Asia after the region’s stocks jumped 2.4% last week amid improved sentiment following the Federal Reserve’s rate cut and hopes for more stimulus in China. Investors are now shifting to assess how quickly Trump will implement his fiscal and protectionist trade policies, including proposed tariffs on China.
“The market’s next move will hinge on whether Trump prioritizes cutting taxes or raising tariffs, each having vastly different impact,” Tony Sycamore, an analyst at IG Markets in Sydney, wrote in a note. “This clarification may still be months away and it’s worth remembering that back in 2016, Trump’s first move was to cut taxes which sent stock markets surging before tariffs on China caused headwinds.”
Sentiment toward China is faltering as foreign direct investment slumps amid geopolitical tensions, competition from domestic industries and concerns over the nation’s economic outlook. Consumer inflation eased closer to zero in October, suggesting the government’s latest round of stimulus is far from sufficient to free the economy from the grip of deflation.
“Many feel that China is keeping its tactical powder in play for such time as the Trump-China tariff negotiations build, and they can respond in a more targeted fashion to stem the likely economic fallout,” Chris Weston, head of research at Pepperstone Group in Melbourne wrote in a note. “In the short-term, however, it does suggest downside risk to China/Hong Kong equity and the yuan.”
The dollar edged higher against major peers in early Asian trading, extending last week’s gain amid concerns that Trump’s fiscal policies will stoke inflation. While the US Treasury yield curve flattened Friday, firms including BlackRock, JPMorgan Chase, and TCW Group are warning that the bond market selloff is likely far from over.
Meantime, Bitcoin surged past $80,000 for the first time on Sunday, driven by the incoming president’s support for digital assets and the election of pro-crypto lawmakers.
This week, traders will be parsing data from Australian jobs to Chinese retail sales and industrial production, inflation from the US and Eurozone as well as growth readings in the UK and Japan. A swath of Federal Reserve officials are scheduled to speak which may help indicate the central bank’s thinking following the election result.
Key events this week:
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Japan current account, Monday
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Denmark CPI, Monday
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Norway CPI, Monday
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United Nations climate change conference, COP29 begins, Monday
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Germany CPI, Tuesday
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UK jobless claims, unemployment, Tuesday
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Fed speakers including Christopher Waller, Tuesday
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Japan PPI, Wednesday
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Eurozone industrial production, Wednesday
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US CPI, Wednesday
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Australia unemployment, Thursday
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Eurozone GDP, Thursday
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US PPI, jobless claims, Thursday
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Reserve Bank of Australia Governor Michele Bullock speaks, Thursday
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Fed Chair Jerome Powell speaks, Thursday
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ECB President Christine Lagarde speaks, Thursday
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BOE Governor Andrew Bailey speaks, Thursday
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Japan GDP, industrial production, Friday
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China retail sales, industrial production, fixed-asset investment, Friday
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UK GDP, industrial production, trade balance, Friday
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US retail sales, Friday
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Alibaba earnings, Friday
Some of the major moves in markets:
Stocks
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S&P/ASX 200 futures fell 0.4% as of 7:14 a.m. in Tokyo
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Nikkei 225 futures fell 0.9%
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Hang Seng futures fell 1.6%
Currencies
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The euro was little changed at $1.0709
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The Japanese yen was little changed at 152.75 per dollar
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The offshore yuan was little changed at 7.2004 per dollar
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The Australian dollar was unchanged at $0.6583
Cryptocurrencies
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Bitcoin rose 0.5% to $80,379.78
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Ether rose 0.7% to $3,193.15
Bonds
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The yield on 10-year Treasuries declined two basis points to 4.30% on Friday
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Australia’s 10-year yield fell four basis points to 4.53% on Monday
This story was produced with the assistance of Bloomberg Automation.
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