Monday, 21 November 2016

Asian shares on the defensive as US yields, dollar rise

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Asian shares were on the defensive on Monday, undermined by fears that the strength in the US dollar and rising US bond yields since Donald Trump's election to president could accelerate fund outflows from emerging markets. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 percent, staying near four-month lows. Japan's Nikkei rose 0.3 percent as the yen continued to slip against the dollar. Trump's unexpected election victory has led to a major repricing of assets, with investors rushing to buy US stocks and the Dollar, while dumping bonds and emerging market assets. Carrying out even some of his plans for deregulation and tax cuts would undermine assumptions investors had long held - that the US economy would grow modestly and inflation would remain tame in the foreseeable future. 

 

Trump's protectionism could hurt many of US trade partners, including emerging markets which could see decline in exports to the US. To be sure, investors have little idea to what extent Trump can implement his proposals, including slapping tariffs on major trading partners such as China and Mexico and heavy tax cuts that would widen the US fiscal deficit.

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