European stocks are poised for an upward trajectory, diverging from recent losses in Asian markets. The Euro Stoxx 50 futures have risen by 0.5%, signaling optimism as investors anticipate a rebound in European equities.
While Asian equities experienced a decline, with major players like Tencent Holdings and Meituan leading a drop of up to 1.3%, European markets appear to be bucking this trend. The index of Chinese companies listed in Hong Kong fell by 1.7%, and the CSI 300 benchmark initially dropped 1.4% before recovering to close with modest gains.
Concerns linger regarding China’s economic outlook after the government announced a 10 trillion yuan ($1.4 trillion) initiative aimed at alleviating local government debt risks without introducing substantial new fiscal stimulus. This cautious approach, coupled with sluggish inflation and declining foreign direct investment, has dampened sentiment toward the world’s second-largest economy.
Investors had anticipated more aggressive stimulus measures following a key legislative meeting in China, particularly in light of uncertainties surrounding tariffs after Donald Trump’s presidential victory. Many economists believe that Beijing is strategically maintaining flexibility to address potential trade conflicts once Trump assumes office.
Ecaterina Bigos, Chief Investment Officer for Asia excluding Japan at AXA Investment Managers, indicated that increased volatility in Chinese equities is likely as the fundamental economic picture remains unchanged despite recent policy announcements.
In response to these developments, UBS has revised its growth forecast for China down to approximately 4% for 2025, reflecting concerns over the economic impact of Trump’s election.
On the commodities front, oil prices stabilized after an initial decline driven by weak demand forecasts from China, while iron ore prices dipped towards $100 per ton. In the tech sector, shares of Taiwan Semiconductor Manufacturing Co. fell following reports that the U.S. government instructed the firm to halt shipments of advanced chips used in AI applications to Chinese clients.
In cryptocurrency markets, Bitcoin surged past $81,000, buoyed by Trump’s support for digital assets and the election of pro-crypto lawmakers. This rally has also positively impacted smaller cryptocurrencies.
The dollar and euro remained stable, while the yen weakened after discussions within the Bank of Japan highlighted caution regarding any immediate rate hikes.
In Japan, Prime Minister Shigeru Ishiba garnered significant support in a recent voting round despite facing challenges following a national election setback. He is expected to meet with President-elect Trump later this month, which could further influence market dynamics.
Meanwhile, Federal Reserve Bank of Minneapolis President Neel Kashkari hinted at a potential moderation in rate cuts amid a strong U.S. economy but emphasized that it is still too early to assess the implications of Trump’s policies on monetary strategy.
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