Asian markets retreated again on 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 exit for a second day after the new US president signed an executive order on 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.
And the sell-off continued into Asia, with Tokyo ending the morning 1.3 percent lower, Sydney shedding 0.6 percent and Seoul 0.3 percent. Singapore, Wellington, Manila and Kuala Lumpur were also all sharply lower.
The dollar also lost ground against most of its major peers, while 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. However, while there are 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.
“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 hoping for some guidance on fiscal policy, while the Federal Reserve is also holding a gathering this week following by the release Friday of closely watched US jobs data.
