SYDNEY: Asian shares fell on Tuesday as investors pondered the prospect of a Trump victory and what that would mean for China, while the dollar climbed for a second day even though dovish Fed comments fuelled bets of more US rate cuts this year.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%, having eased 0.3% on Monday.
Japan returned from a public holiday, with the Nikkei index up 0.4%.
Overnight, investors continued to digest the fallout from the attempted assassination on Saturday of former US President Donald Trump, who is favourite to win the White House in November and who on Monday nominated his vice presidential running mate J.D. Vance.
Wall Street closed higher, with the Dow Jones notching an all-time closing high thanks to energy and banking shares.
Bitcoin jumped 6%, gold climbed towards a record high and the yield curve steepened as investors favoured so called Trump-victory trades.
“J.D. Vance sits in the camp of taking China on head-first in a bid for improved trade deals for the US, and this will only weigh on sentiment towards China, where we saw better selling in China equity yesterday,” said Chris Weston, head of research at Pepperstone.
The Shanghai Composite index fell 0.3%, while Hong Kong’s Hang Seng index lost 1.4%, having already dropped 1.5% the day before soft economic data from China heightened the risk that Beijing could miss its 5% growth target this year, barring forceful stimulus.
Treasuries slip, dollar firm as markets grapple with US politics
Also cheering Wall Street, Fed Chair Jerome Powell said on Monday the three US inflation readings over the second quarter do “add somewhat to confidence” that inflation is returning to the Fed’s target in a sustainable fashion.
Markets have now fully priced in a quarter-point rate cut from the Fed in September, with a total easing of 68 basis points expected by the end of the year.
That kept a lid on the US dollar overnight, although it has attracted buying interest as some investors bet on a Trump victory.
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