Asia markets stutter as strong dollar weighs on EM; Shanghai enters bull market

Stocks in Shanghai entered a bull market but other Asian markets stuttered on Friday as the rally in the dollar following Donald Trump’s win in the U.S. presidential election dampened demand for emerging market assets.

The dollar index traded down 0.12 percent at 98.664 as of 2:45 pm HK/SIN, but had touched 99.081, its highest level in more than two weeks, during U.S. hours. The dollar strength stemmed from the ongoing sell-off in U.S. Treasurys and the steepening of the yield curve after the U.S. election results.

The yield on the benchmark 10-year Treasury note climbed to 2.1378 percent as of 1:45 pm HK/SIN compared to yields at around 1.8 percent earlier this week. The 30-year Treasury bond’s yield was up to 2.9453 percent, its highest level since January 12.

Chinese markets shrugged off weakness in many other Asian markets. The Shanghai composite ended up 0.78 percent, or 24.6 points, at 3,195.88, climbing more than 20 percent from the lows hit in January. The Shenzhen composite finished up 0.531 percent, or 11.14 points, at 2,108.03.

Hong Kong’s Hang Seng shed 1.45 percent in afternoon trade.

The Nikkei 225 was up 0.18 percent, or 30.37 points, at 17,374.79, after lurching more than 1 percent higher in early trade.

The yen snapped a five-day losing streak against the dollar, tracking at 106.53 as of 1:45 pm HK/SIN. It was at 102 levels earlier this week.

In Australia, the benchmark ASX 200 closed up 0.79 percent, buoyed by its heavily-weighted financials subindex, which was up 2.86 percent.

Major miners in Australia were also higher, with Rio Tinto up 2.44 percent, Fortescue Metals Group 4.49 percent higher and BHP Billiton up 2.13 percent.

Expectations that Trump’s policies would spur infrastructure spending led a rise in the prices of metals. London Metal Exchange copper was up 0.67 percent at $5,655 a tonne during afternoon trade in Asia, after it had surged to a near 16-month high of $5,714 on Thursday.

“The potential for a significant increase in U.S. demand is a game changer for commodities like copper and is fueling the rally in Australian mining stocks. Around a third of copper demand comes from construction and the US is the second largest consumer behind China,” said Ric Spooner, chief market analyst at CMC Markets, in a note on Friday.

South Korea’s Kospi ended 0.91 percent lower, or 18.17 points, at 1,984.43 after the Bank of Korea left rates at a record-low of 1.25 percent and the won had softened to 1,163.63 against the dollar as of 2:55 pm HK/SIN. On the U.S. Election Day, the won strengthened as much as 1,127 per dollar.

The Dow Jones industrial average hit a new, all-time intraday high of 18.873.6 on Thursday, before closing more than 200 points higher at 18,807.88. The S&P 500 wavered most of its session but closed up 0.2 percent at 2,167.48. The Nasdaq composite underperformed, closing down 0.81 percent at 5,208.8, as the so-called FANG stocks dragged on the prospect of higher interest rates.

“Instead of mourning, investors cheered a Trump victory as they hoped he will be positive for the economy,” Kathy Lien, managing director of FX Strategy for BK Asset Management, said in a note on Friday. “He ran on a campaign of aggressive spending and this is the first time in eight years that there’s prospect of a sizable fiscal stimulus package.”

The recovery seen in the equity market has also increased the odds for a Federal Reserve rate hike in December, Lien said.

“It would her last decision before President Trump can pressure the central bank and the move would show that she isn’t buckling on future political pressure,” Lien explained.

During Asia trade, U.S. crude futures were down 0.27 percent, at $44.54 a barrel after settling at $44.66 on Thursday, while Brent slipped 0.17 percent, to $45.76. Brent had last settlement price was at $45.84 a barrel.

Oil prices settled more than 1 percent lower on Thursday, as markets focused on oversupply issues. The International Energy Agency (IEA) reported that oversupply concerns will remain, unless the Organization of Petroleum Exporting Countries (OPEC) can reach an output cut deal at its November 30 meeting.

Source: CNBC