Dollar weakens, shares wobble after Trump’s protectionist speech

TOKYO — The dollar slid broadly on Monday after US President Donald J. Trump struck a protectionist tone in his inauguration speech, undermining optimism over the US economy spurred by his promises of tax cuts and other stimulus.

Japan’s Nikkei dropped 1.10% while shares in Australia dropped 0.80% after the Trump administration, on its first day in office, declared its intention to withdraw from the Trans-Pacific Partnership (TPP), a 12-nation trade pact that Japan and Australia also have signed up for.

US stock futures dipped 0.30%, erasing gains made on Friday.

European shares were expected to fall, too, with spreadbetters looking to a drop of 0.40% in Britain’s FTSE and 0.30% in Germany’s DAX.

Other Asian shares were more resilient, however, in part due to the dollar’s weakness and a relief that there was no negative surprises, with Mr. Trump refraining from labeling China as a currency manipulator for now, an accusation he made while campaigning.

“At least, there was no negative news this weekend, like a border tax or the currency manipulator, even though they could come up in the future,” said Yukino Yamada, senior strategist at Daiwa Securities.

MSCI’s broadest index of AsiaPacific shares outside Japan rose 0.30%, with Taiwan shares leading the gains and coming just shy of one-and-a-half-year highs.

In his inaugural address, Mr. Trump pledged to end what he called an “American carnage” of rusted factories and vowed to put “America first,” laying out two simple rules — buy American and hire American.

Mr. Trump also said on Sunday he plans talks soon with the leaders of Canada and Mexico to begin renegotiating the North American Free Trade Agreement (NAFTA).

“The market is getting nervous about the possibility that the world’s trade might shrink,” said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank in Tokyo.

“Many of his policies, including tax cuts and infrastructure spending, need approval from the Senate and that (may not be) easy,” he said. “The markets that had been led by expectations on his policy since the election are now the dragged down by the reality.”

The dollar had soared late last year on expectations that Mr. Trump’s pledges to cut taxes and hike infrastructure spending would boost the US economy, spurring inflation and higher interest rates.

But optimism is starting to fade as details of his tax policies remained sketchy. It is not clear if the Congress will agree to any plan that could drastically increase budget deficits. —