Stocks globally and the U.S. dollar have broadly rallied in the wake of President Donald Trump’s election in November, buoyed by his talk of a tax overhaul and infrastructure investment.
However, roadblocks have risen ahead of Thursday’s scheduled vote to dismantle the Affordable Care Act, triggering a market pullback Tuesday in the U.S. that has carried overseas and has investors questioning Trump’s ability to make good on his policy promises.
“Market participants are doubtful of whether President Trump is able to deliver his ‘phenomenal’ tax cuts,” said Woon Tian Yong, an investment analyst at Phillip Futures.
For some, patience has been wearing thin as his first 100 days in office tick away without detailed policy developments. As such, there are predictions of stocks undergoing a 10% correction.
“My feeling is we are running into a period of risk-off sentiment,” said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets. “I would probably start to underweight [stocks], particularly in the U.S.”
Leading the way lower in Asian stock markets Wednesday was Japan’s Nikkei Stock Average NIK, -2.13% , which fell 2.1% and came within 27 points of breaking below 19,000. It notched its biggest daily drop since an initial slump in the wake of Trump’s electoral win on Nov. 9.
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Australia’s S&P/ASX 200 XJO, -1.56% ended down 1.6%, and Hong Kong’s Hang Seng HSI, -1.11% as recently off 1.4%.
Overnight, financials led U.S. stocks lower as the S&P 500 and Dow industrials both logged their first 1% declines in five months, ending the longest such streak since the mid-1990s.
That theme continued in Asia trading. Japan’s Topix I0000, -2.12% bank subsection plunged 3.2% to its lowest level in two months, Korea’s financial subindex dropped 1.7% and Australia’s “Big Four” banks—Commonwealth Bank of Australia CBA, -2.03% , Westpac Banking WBC, -2.42% , National Australia Bank NAB, -1.58% and Australia and New Zealand Banking ANZ, -2.57% which make up one-third of the weighting of that country’s benchmark stock index—shed 1.5% to 2.6%.
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For Asian oil companies, the broader negative sentiment was compounded by a bearish inventory reading from the American Petroleum Institute, which said U.S. supplies rose by 4.5 million barrels last week. That is twice what analysts on average anticipate from the government’s reading later in the global trading day.
Hong Kong-listed Chinese oil majors PetroChina 0857, -1.86% and Cnooc 0883, -1.76% were down 2.2% and 2.1%, respectively. Brent, the global crude benchmark, dropped a further 0.7% in Asia after falling more than 1% overnight.
However, stocks in China generally logged smaller declines than in other Asian markets amid an influx of liquidity. Over the past three days, the People’s Bank of China has injected into markets a combined 110 billion yuan ($16 billion), resulting in a sharp drop in interbank borrowing rates. The Shanghai Composite Index was recently off 0.5%.
Aside from Trump caution, however, “Asian equity markets are also facing their own drivers which may potentially upset prices further,” said Woon. For example, investors are focusing on the China and Hong Kong banking sectors, which are into earnings season and have question marks around their net interest margins.