Asian shares retreat after Trump’s victory as focus turns to the Fed

Shares retreated in Asia early Thursday (Nov 7) after US stocks stormed to records as investors wagered on what Donald Trump’s return to the White House will mean for the economy and the world.
Markets also were turning their attention to the Federal Reserve’s decision on interest rates, due later in the day.
Japan’s Nikkei 225 shed early gains to fall 0.6 per cent to 39,246.86, while the Kospi in Seoul fell 0.4 per cent to 2,554.57.
Australia’s S&P/ASX 200 edged 0.1 per cent lower, to 8,191.00.
Chinese shares also declined. Hong Kong’s Hang Seng dropped 0.7 per cent to 20,386.36. The Shanghai Composite index also fell 0.7 per cent, to 3,359.99.
Trump has promised to slap blanket 60 per cent tariffs on all Chinese imports, raising them more if Beijing makes a move to invade the self-governing island of Taiwan.
Investors are adding to bets built earlier on what the higher tariffs, lower tax rates and lighter regulation that Trump favours will mean. Higher tariffs on imports from China would add to the burdens Beijing is facing as it struggles to revive slowing growth in the world’s second-largest economy.
Higher tariffs on imports from China, Mexico and other countries also would raise the risk of trade wars and other disruptions to the global economy.
On Wednesday, the US stock market, Elon Musk’s Tesla, banks and bitcoin all stormed higher, however, as investors made bets on what Donald Trump’s return to the White House will mean for the economy and the world.
Among the losers the market sees: The renewable-energy industry and potentially anyone worried about higher inflation.
The S&P 500 rallied 2.5 per cent to 5,929.04 for its best day in nearly two years. The Dow Jones Industrial Average surged 3.6 per cent to 43,729.93, while the Nasdaq composite jumped 3 per cent to 18,983.47. All three indexes topped records they had set in recent weeks.
The impact of Trump’s second term will likely depend on whether his fellow Republicans win control of Congress, and that’s not yet clear.
Investors see Trump’s policies as potentially leading to stronger economic growth. That helps push prices down and yields up for the Treasury.
Tax cuts under Trump could further swell the US government’s deficit, increasing borrowing and forcing yields even higher.
The yield on the 10-year Treasury jumped to 4.43 per cent from 4.29 per cent late on Tuesday, which is a major move for the bond market. It’s up substantially from August when it was below 4 per cent.
Investors expect the incoming president’s policies, particularly higher tariffs, to fan inflation and add costs to US household bills.
Sharp cutbacks in immigration could also leave businesses shorthanded, forcing companies to raise wages for workers faster and put more upward pressure on prices.
Much of Wall Street’s run to records this year was built on expectations for coming cuts to interest rates by the Federal Reserve, as inflation has headed back down to its 2 per cent target.
Easier interest rates help boost the economy, but they can also give inflation more fuel.
The Fed will announce its latest decision on interest rates on Thursday, where the expectation is still for a cut, according to data from CME Group. But traders are already paring back forecasts for how many cuts the Fed will provide through the middle of next year.
In other dealings early Thursday, the US dollar was holding steady against the Japanese yen, at 154.63. The euro slipped to US$1.0728 from US$1.0730.
US benchmark crude oil gained 2 cents to US$71.71 per barrel. Brent crude, the international standard, was up 24 cents at US$75.16.
The price of bitcoin slipped to US$76,165 after hitting an all-time high above US$76,480 on Wednesday, according to CoinDesk. Trump has pledged to make the country “the crypto capital of the planet” and create a “strategic reserve” of bitcoin.