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Asian Stocks Struggle Again, Trump Front and Center

Asian Stocks Struggle Again, Trump Front and Center

David Cottle, Analyst


Talking Points:

  • Donald Trump’s decision to fire his Attorney General kept Asian markets on edge
  • The Bank of Japan left its policy settings alone
  • But the Yen ticked up anyway against a generally slothful US Dollar

Benchmark Japanese shares fell more than one percent on Tuesday, with the Yen gaining ground after the Bank of Japan left its monetary settings alone as expected.

The Nikkei 225 shed 1.7% by the close, with the ASX and Kospi also lower. Markets in Hong Kong and mainland China remained closed for the Lunar New Year holiday. Monday’s generally gloomy backdrop endured into another session. It had been engendered by US President Donald Trump’s executive order banning citizens of seven Middle Eastern nations from entering the country for 90 days. It was deepened on Tuesday by news that Trump had dismissed the acting Attorney General Sally Yates. She had evinced the gravest reservations about the ban, going so far as to question its legality.

Evidence of a combative Trump, prepared to make good even on what markets saw as his more extreme campaign rhetoric, is not a sight investors like to see. Sure enough, stocks struggled and the US Dollar gave up ground.

The White House aside, it was a heavy session for Japanese economic releases. The Bank of Japan kept all key policy rates unchanged, but did up its growth forecasts. However, it acknowledged that the risk to all its calls was to the downside given all the uncertainties now crowding the global horizon. Earlier in the session, the Yen had gained ground on an already Trump-hit US Dollar on the news that Japanese household spending had picked up in December, while unemployment levels remained low and steady.

Elsewhere, crude oil prices declined slightly on wire reports that suggested a big weekly increase in US drilling activity. Gold was as ever the beneficiary of equity market caution, nosing above $1200/oz again.

The remainder of the global session will offer investors a diverse range of economic indicators for those able to tear themselves away from the US Presidential Twitter feed. From Eurozone and Canadian growth data, German employment levels to US consumer confidence, there are plenty of likely market-movers on offer.

Inching higher, but can it hold? How gold fared in Asia:

Chart Compiled Using TradingView

How many of DailyFX analysts’ first-quarter forecasts have survived January? Take a look.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.