Stocks fell in Asia early on Thursday after U.S. stocks surged by record levels as investors bet on what Donald Trump’s return to the White House would mean for the economy and the world.
Markets were also turning their attention to the Federal Reserve’s interest rate decision scheduled for later in the day.
Japan’s Nikkei 225 index rose early in the day, down 0.6% at 39,246.86, and Seoul’s KOSPI closed at 2,554.57, down 0.4%.
S in Australia&The P/ASX 200 was down 0.1% at 8,191.00.
The Chinese stock market also fell. Hong Kong’s Hang Seng index fell 0.7% to 20,386.36. The Shanghai Composite Index also fell 0.7% to 3,359.99.
President Trump promised to impose a 60% tariff on all Chinese imports if China invades Taiwan.
Investors are adding to bets they had built earlier on what the higher tariffs, lower tax rates and deregulation that Trump favors will mean. Raising tariffs on Chinese imports will add to the burden facing China as it struggles to revive slowing growth in the world’s second-largest economy.
Raising tariffs on imports from China, Mexico and other countries would increase the risk of trade wars and other disruptions to the global economy.
However, the US stock market, Elon Musk’s Tesla, banks and Bitcoin all posted gains on Wednesday. That’s because investors were betting on what impact Donald Trump’s return to the White House would have on the economy and the world. Among the losers the market sees are the renewable energy industry and anyone worried about potentially high inflation.
S&The P 500 rose 2.5% to 5,929.04, its best day in nearly two years. The Dow Jones Industrial Average surged 3.6% to 43,729.93, and the Nasdaq Composite Index rose 3% to 18,983.47. All three indices surpassed records set in recent weeks.
The impact of Trump’s second term will likely depend on whether his fellow Republicans control Congress, which is not yet clear.
Investors see Trump’s policies potentially leading to stronger economic growth. This helps keep prices down and Treasury yields higher. The Trump administration’s tax cuts could further increase the U.S. government deficit, leading to more borrowing and higher yields. The 10-year Treasury yield surged from 4.29% to 4.43% on Tuesday afternoon, causing a major change in the bond market. It was a significant increase compared to August, when it was less than 4%.
Investors expect the incoming president’s policies, especially higher tariffs, will fuel inflation and add costs to U.S. household bills. Sharp cuts in immigration could lead to labor shortages for businesses, forcing them to raise wages for workers faster and putting more upward pressure on prices.
Much of Wall Street’s record run this year was based on expectations that the Federal Reserve would cut interest rates as inflation fell back to its 2% target. Easing interest rates can help stimulate the economy, but it can also fuel inflation.
The Federal Reserve is expected to announce its latest decision on interest rates on Thursday, with cuts still expected, according to data from CME Group. But traders are already scaling back forecasts for how much cuts the Fed will deliver by the middle of next year.
In other trading on Thursday morning, the U.S. dollar held steady at 154.63 against the Japanese yen. The euro fell from $1.0730 to $1.0728.
U.S. benchmark crude oil rose 2 cents to $71.71 per barrel. Brent crude oil, the international standard, rose 24 cents to trade at $75.16.
The price of Bitcoin fell to $76,165 after hitting an all-time high above $76,480 on Wednesday, according to CoinDesk. President Trump promised to make the country the “crypto capital of the Earth” and create a “strategic reserve” of Bitcoin.
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AP Business Writer Stan Choe contributed to this report.
