Weakness in Chinese markets dragged broader Asian shares lower on Thursday, while U.S. bond yields and the dollar rose as investors weighed the outlook for inflation and monetary policy in the wake of Donald Trump’s return to the White House.
In Asia, the MSCI index of Asia-Pacific shares outside Japan fell by 0.3%, reversing slight early gains. Chinese stocks were under pressure, with the mainland CSI300 blue-chip index losing 0.16% and the Shanghai Composite Index dipping 0.24%. Hong Kong’s Hang Seng Index also fell by 0.34%. The sell-off came after China unveiled new tax incentives aimed at supporting its troubled property sector, which has been in a prolonged downturn since 2021. Despite the measures, analysts remained skeptical about their impact, with Alvin Tan, head of Asia FX strategy at RBC Capital Markets, stating, “It’s not going to galvanize a lot of people to start buying homes. The inventory overhang is still there.”
Meanwhile, Japan’s Nikkei erased earlier gains, ending the day 0.14% lower. The broader market sentiment in Asia was subdued as investors reacted to ongoing economic challenges in China and a stronger U.S. dollar.
In the U.S., the focus was on the inflation outlook, which rose in line with expectations, prompting speculation that the Federal Reserve may cut interest rates in December. Markets are now pricing in an 83% chance of a 25 basis point rate cut, up from 59% the previous day. Despite these expectations, long-term U.S. bond yields rose, with the benchmark 10-year Treasury yield peaking at 4.483%, its highest since July 1. The 30-year yield also hovered near a five-month high, at 4.6624%.
Boris Kovacevic, global macro strategist at Convera, noted that speculation surrounding Trump’s potential domestic policies, including tax cuts and tariffs, could impact the Federal Reserve’s decisions, though the full effects would likely not be felt until 2025.
The stronger U.S. dollar gained ground against major currencies, rising 0.24% against the yen to trade at 155.86 and pushing the euro to its lowest level in a year at $1.0551. The dollar’s strength came despite the increased likelihood of a rate cut by the Fed in December, which typically would be negative for the currency.
Meanwhile, Bitcoin remained resilient, trading 1.7% higher at $90,151 after surpassing $90,000 in the previous session. The cryptocurrency has surged more than 30% in just two weeks, fueled by growing optimism around Donald Trump’s return to the presidency and expectations that his administration will be more favorable to cryptocurrencies.
Across commodities, oil prices eased on Thursday, with Brent crude futures falling 0.18% to $72.15 a barrel and U.S. West Texas Intermediate crude (WTI) futures shedding 0.28% to $68.24 per barrel. Gold also declined, slipping 0.42% to $2,562.25 an ounce.
As market participants digested a mix of economic data, geopolitical developments, and shifting expectations for U.S. monetary policy, the global market outlook remained uncertain heading into the final months of the year.