Markets swing after Wall St losses as traders weigh US rates outlook

Asian markets were mixed Monday following a sell-off on Wall Street as investors scale back their bets on Federal Reserve interest rate cuts owing to worries Donald Trump could reignite inflation.

A warning from US central bank boss Jerome Powell that reductions in borrowing costs were not preset dented optimism last week, while traders were also keeping tabs on the president-elect’s cabinet choices, with several China hawks lined up.

Expectations that a second Trump administration will impose fresh painful tariffs on Chinese goods has added to the unease and ramped up fears of another trade war between the economic powerhouses.

All three main indexes on Wall Street ended deep in the red Friday, with the Nasdaq down more than two percent, after Powell’s remarks the day before.

After Trump’s victory at the start of the month, markets had already been winding back their expectations for the number of rate cuts the Fed would announce next year.

The bank’s next policy decision in December will be closely followed for an idea about officials’ plans.

Still, Philipp E. B”rtschi, chief investment officer at Bank J. Safra Sarasin, was upbeat about the outlook for equities.

“The clear and swift outcome of the US elections reduced uncertainty and investors’ appetite for risk improved significantly,” he said in a note. “This trend is likely to continue in the coming weeks and ensure a positive year-end on the financial markets.

“With the election of Donald Trump as US president, the volatility in macro forecasts is likely to increase due to his plans. Deregulation and tax cuts would accelerate nominal growth, while a trade war should slow growth.

“Although many of Trump’s proposals will only have an impact after a delay — if at all — consumer sentiment and the business climate are likely to improve in the short term. A possible US recession has receded into the distant future.”

In early Asian trade, Hong Kong and Sydney led gains, adding more than one percent each, while Singapore, Seoul, Wellington and Manila also rose.

However, Tokyo dropped with Taipei and Jakarta, while Sydney was flat.

The lowering of US rate cut expectations helped the dollar hold onto gains against its major peers, with investors also tracking comments from Japanese authorities amid speculation they could intervene in forex markets if the yen weakens too much too quickly.

And bitcoin sat just above $90,000, having hit another record high of $93,462 last week on hopes Trump will push for more deregulation of the crypto market.

Dealers were also awaiting the release of earnings from chip titan Nvidia this week, after the firm led a surge in tech firms this year owing to an explosion in demand for all things linked to artificial intelligence.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 0.8 percent at 38,343.39 (break)

Hong Kong – Hang Seng Index: UP 1.6 percent at 19,729.41

Shanghai – Composite: UP 1.3 percent at 3,372.31

Euro/dollar: UP at $1.0542 from $1.0536 on Friday

Pound/dollar: UP at $1.2634 from $1.2611

Dollar/yen: UP at 154.82 yen from 154.32 yen

Euro/pound: DOWN at 83.44 pence from 83.52 pence

West Texas Intermediate: UP 0.1 percent at $67.07 per barrel

Brent North Sea Crude: UP 0.2 percent at $71.17 per barrel

New York – Dow: DOWN 0.7 percent at 43,444.99 (close)

London – FTSE 100: DOWN 0.1 percent at 8,063.61 (close). (BSS/AFP)