Asian Stocks Rise on Wall Street's Gains

By Kevin Buckland

TOKYO (Reuters) – Asian stocks rose broadly on Friday, tracking Wall Street's overnight rise to record highs, as investors absorbed the Federal Reserve's message for cautious interest rate cuts despite expectations for big fiscal spending under incoming President Donald Trump.

U.S. Treasury yields fell to new lows during Asian hours, applying pressure on the dollar following its largest decline against major peers in over six weeks on Thursday.

Asia-Pacific stocks were set for a 3.1% rally this week after quickly recovering from an initial dip on U.S. election night, which had raised concerns about trade tariffs, particularly in China.

However, optimism about stimulus from Beijing improved sentiment as the week-long National People's Congress Standing Committee meeting concluded on Friday, with officials holding a briefing. Sources told Reuters that Chinese fiscal spending may increase if Trump is re-elected.

Mainland Chinese blue chips rose 0.5% by 0155 GMT after a 3% surge on Thursday, with Hong Kong's Hang Seng up by 1%.

Japan's Nikkei gained 0.25%, reflecting a weekly increase of 3.7%. Australia saw its stock benchmark climb 1%, while Taiwan's benchmark rose 0.7%.

Global stocks, led by Wall Street, are on track for a 3.3% weekly gain, reaching record highs.

Trump's return to the White House on Tuesday, alongside Republicans regaining Senate control and potentially increasing their House majority, defied polls that indicated a close election with Democrat Kamala Harris.

Expectations of Trump lowering corporate taxes and loosening regulations propelled all three major Wall Street indexes to record highs on Wednesday, with S&P 500 and Nasdaq extending those peaks on Thursday. Fed Chair Jerome Powell indicated continued patient policy easing. The Dow ended flat.

"We believe the economy, and our policies, are in a very good place," said Powell during his post-meeting news conference.

He noted, "We don't know what the timing and nature of any policy changes will be," regarding the incoming Trump administration, acknowledging analysts' expectations for inflationary tariffs and immigration policies.

U.S. two-year Treasury yields, sensitive to monetary policy expectations, declined to 4.2119% on Friday, down from a more than three-month high of 4.3120% on Wednesday.

The dollar index, measuring the currency against six major peers, rose slightly to 104.53, following a 0.7% drop on Thursday, its largest since August 23. The dollar had soared 1.53% on Wednesday, marking its most significant increase in over two years.

"Markets have moved past the 'honeymoon period' for the president-elect, and USD and U.S. rates are now in a 'window period,' reflecting consideration of the policy outlook," said Shoki Omori, chief Japan desk strategist at Mizuho (NYSE:MFG) Securities.

He added, "The crucial question is whether the president-elect and his team will favor more fiscal issuance next year," urging market participants to remain attentive to potential market-moving social media posts from Trump.

Bitcoin remained flat at $76,000 after a nearly 10% surge this week, hitting a record high of $76,980 on Thursday. Trump has promised to transform the U.S. into "the crypto capital of the planet."

Gold struggled for additional gains after a volatile week, easing 0.2% to $2,701.55 in the latest session. It slumped over 3% on Wednesday but bounced back by 1.8% overnight. Last week it surged to an all-time high of $2,790.15.

Oil prices slipped on Friday after gaining about 1% overnight, as the market assessed how President-elect Donald Trump's policies would affect supplies and as drillers reduced output in anticipation of Hurricane Rafael.

Brent crude oil futures fell 0.22% to $75.46 a barrel, while U.S. West Texas Intermediate (WTI) crude declined 0.35% to $72.11.