Equities advanced in regional markets from Australia to Japan and China. A gauge of major Chinese firms listed in Hong Kong rose as much as 2.5%, after Trump described the pre-inauguration talk between the two leaders as “very good.” US futures were marginally lower in Asia with Wall Street closed on Monday for a holiday.
A gauge of the dollar slipped, extending last week’s decline after snapping a six-week rally.
The stronger appetite for risk assets came after Trump and Xi discussed trade, TikTok and fentanyl, which may set the tone for relations in the early days of the new administration. Adding to the brighter mood, TikTok started restoring service in the US on Sunday as Trump said he would halt enforcement of a law requiring the app’s Chinese owner to find a buyer for three months.
Whether the momentum can continue hinges on how quickly Trump will implement his policies ranging from lower taxes to higher tariffs and tighter immigration control, the inflationary impact of which may keep the dollar strong and Treasury yields elevated. His stance on issues including the tech rivalry with China and climate change also will likely affect investment decisions on sectors from semiconductors to electric vehicles, and shipbuilding.
“Trump has indicated that he wants to have a good working relationship with Xi Jinping but he has made clear that there are Chinese policies that he’s dissatisfied with,” said Bonnie Glaser, managing director of the Indo-Pacific program at the German Marshall Fund.’
Trump is said to be planning a flurry of executive orders around immigration, energy, federal workers and regulatory reform in the early hours after his Jan. 20 inauguration, part of a sweeping effort to quickly implement his policy agenda upon taking office.
Among the array of actions will be a move to invoke emergency powers as part of his plan to unleash domestic energy production while seeking to reverse President Joe Biden’s actions to combat climate change, according to people familiar with the matter.
Trump’s combination of pro-growth and protectionist policies have prompted analysts to predict a less hawkish Federal Reserve, a strengthening dollar and weakness in bonds. For one, Nomura Holdings Inc. has joined T. Rowe Price in seeing a chance of 10-year Treasury yields rising to 6% this year, while a small group of bond traders believe the US central bank’s next move on interest rates will be to increase them, contrary to the majority view that rates will be cut.
Elsewhere, Chinese Vice President Han Zheng met billionaire Elon Musk and other US business figures, underscoring Beijing’s efforts to set a positive tone in ties with the US before Trump returns to office.
Meanwhile, Chinese banks kept their key loan prime rates unchanged, as expected by Bloomberg Intelligence.
The World Economic Forum’s annual meeting gets underway later Monday. Among the group of billionaires set to join the pilgrimage of the rich and powerful to Davos, Switzerland are Larry Fink, Ray Dalio and Marc Benioff. Trump will speak virtually to the gathering three days after his inauguration.
Later in the week, the focus will shift toward the Bank of Japan’s scheduled policy decision on Friday, with about three quarters of economists in a Bloomberg survey expecting it to hike its key rate.
BOJ officials also see a good chance of a rate increase as long as Trump doesn’t trigger too many immediate negative surprises, Bloomberg reported on Thursday, citing people familiar with the matter.
“I think there’s a high probability that the BOJ will move the trigger on rates,” said Mahjabeen Zaman, head of FX research at Australia & New Zealand Banking Group, told Bloomberg TV. “All the economic data in Japan that’s been coming out fully support a rate hike - if not now, very soon.”
A digital token debuted by Trump has rattled the cryptocurrency market, attracting billions of dollars of trading volume while stoking concerns about conflicts of interest. Meanwhile, the wider crypto market struggled, with the largest token Bitcoin down 1.8% Monday.
In commodities, oil was steady ahead of the inauguration of President-elect Donald Trump, as the market braced for a period of uncertainty and turmoil at the start of his second term in the White House.
Key events this week:
The annual World Economic Forum in Davos begins, Monday
Donald Trump to be sworn in as 47th president of US, Monday
UK jobless claims, unemployment, Tuesday
Canada CPI, Tuesday
New Zealand CPI, Wednesday
Malaysia CPI, rate decision, Wednesday
South Africa retail sales, CPI, Wednesday
ECB President Christine Lagarde and other officials speak at Davos, Wednesday
South Korea GDP, Thursday
Eurozone consumer confidence, Thursday
Turkey rate decision, Thursday
Norway rate decision, Thursday
Canada retail sales, Thursday
Trump will join the World Economic Forum for an online “dialogue”
Japan CPI, rate decision, Friday
India, euro area, UK PMIs, Friday
ECB President Christine Lagarde and BlackRock CEO Larry Fink speak at Davos, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 12:02 p.m. Tokyo time
Nikkei 225 futures (OSE) rose 1.3%
Japan’s Topix rose 1.4%
Australia’s S&P/ASX 200 rose 0.3%
Hong Kong’s Hang Seng rose 1.8%
The Shanghai Composite rose 0.4%
Euro Stoxx 50 futures were little changed
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.0292
The Japanese yen rose 0.2% to 155.95 per dollar
The offshore yuan rose 0.2% to 7.3254 per dollar
Cryptocurrencies
Bitcoin fell 2.1% to $101,385.04
Ether was little changed at $3,228.51
Bonds
The yield on 10-year Treasuries was little changed at 4.63%
Australia’s 10-year yield was little changed at 4.49%
Commodities
West Texas Intermediate crude rose 0.2% to $78 a barrel
Spot gold fell 0.2% to $2,697.97 an ounce
This story was produced with the assistance of Bloomberg Automation.
