Asian Markets Remain Cautious Post-Trump Election Rally Amid China Stimulus Hopes and Fed Watch

Asian stocks saw limited movement on Thursday, with early gains following Donald Trump’s election victory in the U.S. beginning to taper off. The initial rally sparked by optimism on Wall Street is being overshadowed by concerns over trade and stimulus policies. Investors are now focused on additional economic measures from China and the Federal Reserve’s upcoming interest rate decision.

Chinese Stocks Edge Higher Amid Tariff Concerns

Chinese stock markets experienced modest gains, with the Shanghai Shenzhen CSI 300 and the Shanghai Composite rising 0.4%, while the Hang Seng index in Hong Kong rebounded with a nearly 1% increase. Despite fears of strict trade tariffs from a Trump administration — including a proposed 60% tariff on Chinese imports — Chinese markets have shown resilience, bolstered by expectations of more fiscal support from the National People’s Congress (NPC). The NPC meeting, ongoing this week, is anticipated to announce significant fiscal stimulus plans to uplift China’s economic outlook.

Chinese President Xi Jinping and President-elect Donald Trump reportedly held a congratulatory phone call, signaling diplomatic overtures despite the looming threat of a trade conflict. Meanwhile, trade data from China is set to be released later on Thursday, which could further influence market sentiment.

Japanese Stocks Supported by a Weaker Yen

Japan’s Nikkei 225 index fell by 0.3%, reversing some of the gains from a sharp 2.6% rally in the previous session. The broader TOPIX index, however, rose by 0.8%, supported by a depreciating yen, which boosted confidence in export-driven sectors. The yen’s weakness comes as the dollar strengthens, driven by expectations of a wider interest rate gap between the U.S. and Japan under a Trump presidency.

Toyota Motor Corp saw its shares surge over 4% despite underwhelming earnings for the September quarter, benefiting from the yen’s depreciation. In contrast, Honda Motor Co Ltd fell slightly, down 0.2%, as the company flagged concerns over declining sales in China and potential adverse effects from increased U.S. tariffs.

Broader Asian Market Trends

Across the region, broader Asian markets displayed mixed performance. Australia’s ASX 200 dropped 0.2%, affected by data indicating that the country’s trade balance had hit its lowest level in four years due to weakened commodity demand from China. South Korea’s KOSPI index also declined 0.2%, reflecting investor caution.

Indian markets appeared poised for a subdued start, with futures for the Nifty 50 indicating a flat open following a recovery from recent four-month lows.

Awaiting the Federal Reserve’s Decision

Investor attention is now turning to the Federal Reserve, which is expected to announce a 25-basis-point interest rate cut later on Thursday. However, uncertainty remains regarding the Fed’s future policy direction, particularly as inflation has shown signs of persistence. The outcome of the Fed meeting and its guidance will be critical in shaping market sentiment.

In summary, while Asian markets experienced initial optimism following Trump’s U.S. election win, this momentum has cooled as traders weigh the implications of possible trade tensions with China and the anticipated policy direction from central banks.