Asian stocks are expected to continue their upward trend on Tuesday following Donald Trump's nomination of Scott Bessent as Treasury Secretary, which spurred optimism on Wall Street. Traders anticipate Bessent's financial expertise will help stabilise markets, as US bond yields declined and shares climbed on Monday.

Australian shares opened higher, while futures indicated gains in Japan and Hong Kong. Asia's benchmark index rose 0.8% on Monday, and US stock futures showed positive movement. Meanwhile, US Treasuries rallied across maturities, with the 10-year yield falling 13 basis points to 4.27%.

The Bloomberg Dollar Spot Index dropped 0.5%, marking its largest decline in over two weeks. However, Bitcoin retreated after nearing the historic US$100,000 mark, falling short of the milestone.

"Investors are viewing this nomination as one that will provide a Goldilocks scenario for Mr. Trump's pro-business proposals," commented Matt Maley of Miller Tabak + Co.

Market Movements and Reactions

Bessent's nomination has been welcomed by investors, who see his familiarity with global financial systems as a stabilising factor. While he has voiced support for Trump's tariff policies and tax cuts, his pragmatic approach has eased concerns of market volatility.

In the US, the S&P 500 rose 0.3%, while the Nasdaq 100 added 0.1%. Australian 10-year bond yields followed US movements, dropping seven basis points early Tuesday. West Texas Intermediate crude remained steady after Monday's 3.2% decline, as signs of a ceasefire between Israel and Hezbollah emerged.

Inflation and Fed Policy Outlook

Despite the strong market momentum, analysts caution against excessive optimism. Callie Cox of Ritholtz Wealth Management noted, "Yields show that expectations have moved a lot over the past two months, yet we haven't seen any sustained, clear momentum in economic data. December could be a reality check for people convinced that the economy is firing on all cylinders again."

The Federal Reserve's preferred inflation gauge, the personal consumption expenditures price index excluding food and energy, is forecast to rise by 0.3% in October from the previous month and 2.8% year-on-year. This would mark the largest annual increase since April, underscoring persistent inflationary pressures.

Fed Bank of Chicago President Austan Goolsbee indicated that the central bank might continue easing rates gradually to achieve a neutral stance that neither stimulates nor restricts economic growth.

As Asian markets prepare for another day of gains, cautious optimism remains the overarching sentiment.

Bloomberg