Asian Markets Edge Cautiously Higher as Investors Eye China’s Stimulus Plans Amid Global Economic Shifts
Asian stock markets made modest gains on Friday morning, buoyed by expectations for potential stimulus measures from Beijing as China’s week-long legislative meeting nears its end.
Early trading saw Asian equities tracking Wall Street’s overnight surge, where major indexes reached record highs, bolstered by investor optimism about the Federal Reserve’s approach to gradual interest rate cuts and anticipated fiscal policies under incoming President Donald Trump.
U.S. Treasury yields dipped to new lows in early Asian trading hours, putting further downward pressure on the dollar, which experienced its most significant drop against other major currencies in over six weeks on Thursday.
As of 5:52 GMT, the MSCI Asia-Pacific index was up 0.33%, after initially climbing as high as 0.78%. This week’s rally marks a notable 2.7% recovery for the index, which bounced back from a post-election dip as initial concerns over potential trade tariffs from the U.S. were tempered by expectations of a strong fiscal response from China, Reuters.
Investor sentiment was particularly optimistic regarding China’s potential stimulus, which helped Chinese stocks maintain steady growth throughout the week. Mainland blue-chip stocks rallied by 3% on Thursday alone, though they later dipped 0.5% on Friday after initially rising by 1.3%.
The Hang Seng index in Hong Kong also declined by 0.6% by midday Friday. Friday’s conclusion of the National People’s Congress Standing Committee meeting will likely include a briefing on potential fiscal policies, with reports suggesting that China may expand fiscal spending depending on the U.S. political climate and the implications of a second Trump term.
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According to Tao Wang, an economist at DBS, a full stimulus package announcement is unlikely at Friday’s briefing. “Chinese leaders need time to assess the timing and impact of U.S. policies on the country,” Wang noted in a client report.
DBS’s equity strategist James Wang echoed this sentiment, highlighting short-term downside risks in the Chinese market, which he said “has yet to fully price in the potential implications of a 60% tariff scenario.”
Elsewhere in Asia, the Nikkei index in Japan rose 0.6%, capping off a 4.1% gain for the week. Australia’s stock benchmark advanced by 0.8%, while Taiwan’s benchmark gained 0.6%. South Korea’s Kospi index saw a slight dip of 0.2%.
In Europe, futures for Britain’s FTSE and Germany’s DAX were up approximately 0.2%, even as the FTSE slipped 0.32% on Thursday amid concerns about rising inflation, a signal issued by the Bank of England, Reuters.
Global equities, driven by Wall Street’s strength, are on track for a robust 3.3% gain this week, reaching record highs. With Trump securing his re-election earlier in the week and Republicans likely gaining control of the Senate, investor expectations for pro-business policies—such as lower corporate taxes and reduced regulations—have propelled the U.S. stock market upward.
All three major U.S. indexes hit record levels on Wednesday, and both the S&P 500 and Nasdaq extended those highs on Thursday. The Dow, however, ended the session flat.
Federal Reserve Chair Jerome Powell has reassured markets that the recent election outcome would not immediately affect U.S. monetary policy. He reiterated that the Fed remains committed to a gradual, patient approach to policy adjustments. Powell’s comments followed Trump’s election pledge to implement broad-based tax cuts, tariffs, and policies targeting immigration.
U.S. two-year Treasury yields, which are highly responsive to monetary policy signals, dropped to 4.2016% on Friday, following a three-month high of 4.3120% earlier in the week. The dollar index saw a slight uptick to 104.53, following a notable 0.7% decline on Thursday—the biggest since late August. However, this came after the dollar had experienced a significant surge of 1.53% on Wednesday, marking its largest jump in over two years.
According to Shoki Omori, chief Japan desk strategist at Mizuho Securities, markets are now adjusting to the policy expectations associated with Trump’s re-election. “The key will be the president-elect’s fiscal approach next year,” Omori noted, adding that investors will also remain cautious regarding market-moving announcements from Trump on social media.
In the cryptocurrency space, Bitcoin held steady around $76,000 following a nearly 10% surge this week, reaching a record high of $76,980 on Thursday. Trump’s pledge to establish the U.S. as a “crypto capital” has contributed to bullish sentiment for digital assets.
Meanwhile, gold saw little movement, ending the session down 0.6% at $2,691. Gold has experienced a volatile week, dipping over 3% on Wednesday, then rebounding by 1.8% overnight. Despite this fluctuation, the metal remains close to its recent all-time high of $2,790.15.
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Oil prices edged lower on Friday, following gains of roughly 1% overnight as markets assessed the impact of Trump’s policies on global oil supplies. The sector is also preparing for Hurricane Rafael, which could disrupt production. Brent crude futures were down 0.53%, at $75.23 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped by 0.65% to $71.89.
Overall, while investor sentiment in Asia remains cautious, there is guarded optimism about China’s economic response to recent developments in the U.S., even as global markets face new policy shifts under a renewed Trump administration. Whether these shifts bring immediate clarity or additional uncertainty, the financial world will be closely watching for further policy signals from Washington and Beijing in the coming days and weeks.