Asian stocks gain, dollar pares losses after slump

Traders are gearing up for a potential increase in market volatility as Trump’s proposed policies threaten to worsen trade frictions between the US and the rest of the world

Asian shares rose after Wall Street rallied for a second day, while the dollar narrowed losses as Donald Trump denied a report that his threatened tariffs may be watered down.

A gauge of regional equities gained 0.7%, with increases in Japan, South Korea and Australia. Mainland Chinese stocks fluctuated while those in Hong Kong saw modest declines in early trade. Tencent Holdings Ltd. fell as much as 7%, with Contemporary Amperex Technology Co. down over 6% after the Pentagon included them in a blacklist that labeled several Chinese companies military entities.

US futures were largely steady in Asia after the S&P 500 gained 0.6% Monday and the Nasdaq 100 added 1.1%. Nvidia Corp. hit a record high ahead of a speech by chief executive Jensen Huang.

An index of dollar strength has pared losses after Trump denied a Washington Post report that the President-elect’s aides were exploring tariffs that only cover critical imports. The greenback fell as much as 1% Monday before narrowing the loss to 0.6%. It was flat in Asia on Tuesday.

Traders are gearing up for a potential increase in market volatility as Trump’s proposed policies threaten to worsen trade frictions between the US and the rest of the world. The latest US move to blacklist the Chinese firms is another reminder of rising US-China tensions that may further darken prospects for the world’s No. 2 economy.

“There are jitters around the yuan and that could worsen, which would sour sentiment and Trump’s recent statement reconfirming the broader tariff imposition is no doubt another source of volatility,” said Sat Duhra, a portfolio manager at Janus Henderson Investors. “We are happy to remain underweight China here and find more comfort in ultra-cheap high yield names there that have outperformed the market.”

Treasuries were mostly steady in Asia Tuesday after the yield on the 30-year note climbed to the highest in more than a year on Monday, while that on the benchmark 10-year paper rose three basis points to 4.63%.

The yen dropped as low as 158.42 per dollar, the weakest since July 2024, as traders continued to react to strong US data released during a local holiday last week. The currency may weaken further ahead of US jobs data on Friday, according to strategists.

The past two days’ recovery “shows just how strong the ‘buy the dip’ mentality still is,” said Mark Hackett at Nationwide. “Investors continue to lean heavily on tech. Looking ahead, 2025 won’t be a year for easy double-digit gains by solely investing in the S&P 500. Success in this market will require more discipline and creativity from investors.”

The Canadian dollar turned flat after advancing following Prime Minister Justin Trudeau’s resignation as head of the Liberal Party.

Elsewhere, global credit markets, historically busy at the start of the year, have been particularly hot out of the gates with spreads near their lowest in 17 years. Borrowers from the Asia Pacific sold about $7 billion of dollar-denominated debt on Monday, the most since last June. The charge is set to continue Tuesday, with about a dozen APAC issuers having mandated banks for possible debt sales or marketing notes in the US currency.

Friday’s report is expected to show employers tempered hiring to wrap up a year of moderating yet still-healthy labor market. The data is unlikely to alter the view of Fed officials that they can slow the pace of rate cuts amid a durable economy and inflation that’s dissipating only gradually.

Fed Governor Lisa Cook said Monday that policymakers can proceed more cautiously amid a sturdy labor market and lingering inflation pressures.

Meanwhile, Bitcoin topped $100,000. Oil steadied after its first drop in six sessions, as technical markers showed the recent rally may have gone too far.