HONG KONG: Asian markets were hit by fresh volatility Thursday as uncertainty permeates trading floors after Donald Trump’s shock election win, while the dollar pushed back up on expectations of a US interest rate hike.
Investors have been struggling to ascertain the outlook for the global economy under a Trump presidency after his bellicose rhetoric regarding trade agreements and spending plans that could ramp up inflation — and borrowing costs — at home.
While a surge in the dollar against the yen has sent Tokyo’s Nikkei to nine-month highs, emerging market bourses and currencies have been hit with an outflow of foreign cash as traders bet on better returns in the United States.
By the break Thursday the Nikkei was flat while Hong Kong edged up 0.1 percent, Sydney gained 0.3 percent and Shanghai lost 0.4 percent. Seoul was flat, Jakarta eased 0.2 percent and Kuala Lumpur dipped 0.2 percent but Manila gained 1.7 percent.
The fluctuations came after a tepid lead from Wall Street, where the Dow fell from a record high after a seven-day winning run.
Attention now turns to Federal Reserve boss Janet Yellen’s testimony to congress later in the day, with traders poring over her comments hoping she will provide some idea about the bank’s monetary policy in light of Trump’s win.
Markets had largely expected the Fed to lift rates next month and then gradually through next year. But analysts say that if Trump follows through with pledges to boost spending and cut taxes, inflation could rocket, forcing the Fed to act.
“A December rate hike is almost guaranteed,” James Woods, global investment analyst at Rivkin Securities in Sydney, said in an e-mail to clients. “What will be important will be any revisions to future hike projections.”
The dollar is heading towards the 110 yen mark for the first time since June and is also at a near one-year high on the euro.
But emerging markets currencies are under pressure, hit by a flood of cash out searching for better, safer returns as well as worries about Trump’s protectionist views that could see him throw up huge tariffs to the world’s number-one economy.
Indonesia’s rupiah, the South Korean won and Malaysian ringgit were all down against the dollar Thursday.
On oil markets, traders were waiting to see if the OPEC producers cartel could hammer out a deal to cut crude output.
The commodity surged this week on news the group and Russia were pushing for an agreement before its twice-yearly meeting on November 30.
Key figures around 0230 GMT
Tokyo – Nikkei 225: UP 0.01 percent at 17,864.09 (break)
Hong Kong – Hang Seng: UP 0.1 percent at 22,294.38
Shanghai – Composite: DOWN 0.4 percent at 3,192.30
Euro/dollar: UP at $1.0699 from $1.0688 Wednesday
Dollar/yen: UP at 109.14 yen from 109.09 yen
Pound/dollar: DOWN at $1.2417 from $1.2441
Oil – West Texas Intermediate: DOWN 10 cents at $45.47 per barrel
Oil – Brent North Sea: DOWN 15 cents at $46.48
New York – Dow: DOWN 0.3 percent at 18,868.14 (close)
London – FTSE 100: DOWN 0.6 percent at 6,749.72 (close)