Asia Stocks Stagnate on China Housing Plans as Dollar Rises Amid Trump Trade

By Tom Westbrook

SINGAPORE - Asian stock markets lost their early momentum on Thursday following a housing policy update from China that failed to impress investors. Concurrently, the dollar remained strong, nearing 2.5-month highs, in light of favorable predictions for a Donald Trump presidency.

Market Reactions to China's Housing Policy

In the early hours of trading, Asian shares pulled back from previous gains as news from China regarding its housing policy did not meet expectations. The Shanghai Composite Index struggled, falling by 0.6%, while property stocks in China faced significant declines. This negative trend saw the CSI300's real estate index drop by 5%, effectively erasing two days of gains.

China's housing minister discussed efforts to improve funding access for construction projects. However, this announcement lacked concrete measures to rejuvenate a sector ravaged by strict lending practices and declining property values, which have shaken buyers' confidence. Property developer Sunac China’s decision to raise capital further dampened investor enthusiasm, contributing to a 3% loss in shares of mainland developers listed in Hong Kong.

Regional Market Insights

Australian stocks also experienced a decline, retreating from record highs as mining shares fell due to a drop in iron ore prices. In the U.S., equity futures showed a slight decline after major indexes had recently closed around record levels.

Dollar Strength and Currency Market Dynamics

Meanwhile, the foreign exchange markets have seen the dollar gain ground, driven by a rise in predictions favoring Donald Trump in the U.S. presidential election. Trump's policies on tariffs, taxes, and immigration are perceived as inflationary, which tends to be negative for bonds but positive for the dollar. As a result, the euro was trading at $1.0862, close to its lowest point since early August, while the yen was at 149.40 per dollar.

Damien McColough, head of rates strategy at Westpac, noted the recent surge in the dollar aligns with expectations of a strong economy and fewer Federal Reserve rate cuts. He mentioned that the Trump administration's anticipated softer approach to cryptocurrency regulation has also contributed to market dynamics, with Bitcoin rising by 15% in a week to reach $67,615.

Bonds and Economic Indicators

In bond markets, global bonds remained steady following unexpected drops in British inflation. The European Central Bank is also expected to implement its first consecutive rate cut in 13 years. As for the U.S., benchmark 10-year yields were stable at 4.03%, while two-year yields held at 3.95%.

Economic data released on Wednesday indicated a sharp slowdown in British inflation to an annualized 1.7%, fueling speculation that the Bank of England may reduce rates twice before Christmas. Consequently, this news led to a 0.6% decline in sterling, which traded at $1.2993, near its overnight low.

Commodity Market Observations

In the commodities sector, futures steadied at $74.57 a barrel after four consecutive days of losses. Reports indicated an unexpected drop in stockpiles, providing some support to the price.

Asia, Stocks, China