A pedestrian walks in front of an electric quotation board flashing stock prices on the Nikkei key index of the Tokyo Stock Exchange in Tokyo on January 31, 2017. Japan's central bank hiked its economic growth forecasts on January 31, citing an improved global outlook and a weaker yen but the country's finance chief warned of "uncertainty" caused by the arrival of Donald Trump in the White House. / AFP PHOTO / Kazuhiro NOGI
Asian markets retreated again Tuesday, with fears growing about the impact of Donald Trump’s presidency on the global economy as he faces a wave of criticism over his controversial immigration policy.
Traders fled for the exits for a second day after the new US leader signed an executive order Friday banning entry to travellers from seven Muslim-majority countries and imposing a temporary ban on refugees.
While the White House defended the move as aimed at fighting terrorism, world leaders and protesters around the world condemned it as a war against Muslims.
The overwhelming outrage spooked investors, who fear the announcement could be a sign the tycoon will press ahead with many of his protectionist promises, overshadowing economy-boosting measures such as infrastructure spending and tax cuts — which had fuelled a rally in November and December.
All three main Wall Street indexes ended lower, while London, Paris and Frankfurt each lost more than one percent.
The sell-off continued into Asia, with Tokyo ending 1.7 percent lower. Dealers were unimpressed by the Bank of Japan’s decision to raise its economic growth forecasts through 2019 but delay any fresh monetary-easing measures.
Sydney shed 0.7 percent and Seoul sank 0.8 percent. Singapore, Wellington, Manila and Kuala Lumpur were also sharply lower.
Hong Kong and Shanghai were closed for holidays.
The dollar also lost ground against most of its major peers, with the yen getting extra support from the BoJ’s lack of action on monetary easing.
Higher-yielding currencies such as the South Korean won, Australian dollar and Indonesian rupiah were also stronger.
“The fulcrum for the fear and selling in stocks and the US dollar… was the public’s visceral response to the president’s immigration and travel ban,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader, in a note.
– Moral compass –
“The raft of executive orders from the White House, together with tweets and belligerence from the president since taking the oath of office, have simply reminded markets that there is some darkness in Trump’s policies and Trumponomics.”
Friday’s order was the latest controversial move by Trump in his first week, which also included a row with Mexico over trade and his proposed border wall, battles with the media over the crowd size at his inauguration and unsupported assertions that millions of people voted illegally in the 2016 election.
And on Monday he sacked his acting attorney general, a holdover from the Obama administration, after she ordered Justice Department attorneys not to defend his controversial immigration ban.
But despite fears on trading floors, Stephen Innes, senior trader at OANDA, said markets could recover if Trump implements his pro-growth measures.
“While the Muslim travel ban may have been universally condemned, keep in mind, capital markets lack a moral compass, and while it makes a compelling storyline, the market meltdown overnight was investors voting with their feet in a direct challenge to the Trump inflation trade,” he said.
“Sure, the immigration ban was risk-adverse, but leeriness will quickly fade if the US administration comes through on the fiscal front.”
Dealers are now awaiting the end of a Bank of Japan meeting for some guidance on fiscal policy, while the Federal Reserve is also holding a gathering this week followed by the release Friday of closely-watched US jobs data.
– Key figures around 0700 GMT –
Tokyo – Nikkei 225: DOWN 1.7 percent at 19,041.34 (close)
Sydney – S&P/ASX 200: DOWN 0.7 percent, to 5,620.9 (close)
Hong Kong – Hang Seng: Closed
Shanghai – Composite: Closed
Euro/dollar: UP at $1.0700 from $1.0693
Pound/dollar: UP at $1.2515 from $1.2490
Dollar/yen: DOWN at 113.50 yen from 113.81 yen
Oil – West Texas Intermediate: DOWN 24 cents at $52.39 per barrel
Oil – Brent North Sea: DOWN nine cents at $55.14
New York – Dow: DOWN 0.6 percent at 19,971.13 (close)
London – FTSE 100: DOWN 0.9 percent at 7,118.48 (close)