Asian markets experienced a significant downturn on Tuesday, driven by U.S. President-elect Donald Trump's announcement to implement a 25% tariff on imports from Mexico and Canada and an additional 10% on Chinese goods upon assuming office, igniting concerns about a potential trade war resurgence.
The Chinese Embassy in Washington succinctly stated that neither the U.S. nor China stands to gain from engaging in a trade conflict. Concurrently, the U.S. dollar gained strength amid Trump's tariff pronouncement and in anticipation of the Federal Reserve's upcoming release of its preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, scheduled for Wednesday.
In the commodities market, gold prices hovered around $2,625 per ounce, showing little movement, while oil prices saw an uptick following a previous sharp decline. This rebound was partly attributed to Israel's announcement on nearing a ceasefire agreement with Hezbollah.
Despite ongoing concerns, Chinese and Hong Kong markets largely remained stable, bolstered by expectations of Chinese government fiscal interventions designed to mitigate tariff impacts. China is poised to conduct two significant political sessions in December, potentially paving the way for amplified economic stimulus measures.
Specifically, China's Shanghai Composite index saw a slight decline of 0.12%, closing at 3,259.76, while Hong Kong's Hang Seng index edged up marginally to 19,159.20, ahead of the release of Chinese industrial profit figures and Purchasing Managers’ Index (PMI) data later this week.
In Japan, market indices declined noticeably, with concerns over the yen strengthening and impending tariffs unsettling investors. The Nikkei average fell 0.87% to 38,442 as the region awaited its November inflation figures later in the week. Meanwhile, the broader Topix index dropped 0.96% to settle at 2,689.55, with notable declines ranging from 2% to 4% in prominent tech companies such as Advantest, Tokyo Electron, and Screen Holdings.
Seoul's stock market closed lower in anticipation of Wednesday's Bank of Korea interest rate decision. The Kospi index decreased by 0.55% to 2,520.36, ending a two-day winning run as bio and financial stocks faced considerable selling pressure.
Australia's markets broke a three-day upward trend, led by losses in energy, financial, and material stocks. The benchmark S&P/ASX 200 index decreased by 0.69% to 8,359.40, following a record high in the previous session. Meanwhile, the broader All Ordinaries index finished 0.56% lower at 8,612.60.
In New Zealand, the benchmark S&P/NZX-50 index fell by 0.62% to 13,113.76 ahead of the Reserve Bank of New Zealand's rate decision on Wednesday, with widespread expectations of a 50-basis point reduction in the official cash rate.
On the prior night, U.S. markets closed on a positive note as bond yields decreased following the announcement of President-elect Trump's intention to nominate billionaire hedge fund manager Scott Bessent as Treasury Secretary. The Dow Jones Industrial Average surged by 1%, further extending its four-session gain and reaching a new record closing high. The S&P 500 also grew by 0.3%, prolonging its winning streak to six sessions, while the technology-focused Nasdaq Composite increased by 0.3%.
