By Kevin Buckland
TOKYO (Reuters) - Asia-Pacific equity markets traded higher on Thursday, buoyed by a record rise for U.S. shares overnight, as investors mulled the implications of a Donald Trump presidency, while also eyeing policy decisions from the U.S. Federal Reserve and other major central banks later in the day.
U.S. stock futures pointed higher after all three major Wall Street indexes surged to all-time peaks on Wednesday on the possibility for a Republican sweep that could quickly usher in big fiscal spending.
U.S. Treasury yields soared on the risk of higher deficits, helping lift the dollar to its biggest one-day gain in more than two years on Wednesday, although the currency eased back slightly on Thursday.
The euro was under additional pressure after German Chancellor Olaf Scholz sacked his Finance Minister Christian Lindner, causing the ruling three-party coalition to collapse and setting the stage for a snap election early next year.
German DAX futures added 0.36%, following a 1.1% slide on Wednesday. Pan-European STOXX 50 futures pointed 0.4% higher, and Britain's FTSE futures added 0.38%.
Asian stocks started the day broadly mixed, with Japanese shares lifted by a weaker yen, while Australia's benchmark was weighed down by gold stocks after bullion slumped against a strengthening dollar.
However, markets were higher around the region as of 0634 GMT, with Japan's tech-heavy Nikkei 225 the only major stock index to post losses, even as the broader Topix index gained 1%.
Elevated bond yields buoyed shares of Japanese banks and insurers, but weighed on tech names and other growth stocks. The 10-year U.S. Treasury yield at 4.4255%, hovered close to Wednesday's four-month peak of 4.4790%, while 10-year Japanese government bond yields rose above 1% for the first time in three months.
Analysts also pointed to profit taking after the Nikkei's 2.6% surge on Wednesday.
"In this highly volatile period, you have to be very selective in Japan," said Frank Benzimra, head of Asia equity strategy at Societe Generale (OTC:SCGLY), describing the Nikkei as overextended.
"When we have the Nikkei at this level, I feel very uncomfortable."
Australia's equity benchmark gained 0.3%, while Taiwan's benchmark climbed 0.8%. South Korea's Kospi closed slightly higher, snapping a two-day decline.
Chinese markets, which lost ground on Wednesday due to the likelihood of higher tariffs under another Trump presidency, rebounded in the latest session. Hong Kong's Hang Seng rose 1.5% and mainland blue chips added 2.6%.
China's week-long National People's Congress Standing Committee meeting concludes on Friday, and market participants are keen for fresh details on stimulus measures.
Chinese trade data released on Thursday showed outbound shipments grew at the fastest pace in over two years in October as manufacturers rushed inventory to major export markets in anticipation of further tariffs from the U.S. and the European Union.
Chris Weston, head of research at Pepperstone, said global investors may be rotating into U.S. stocks from markets such as China and Europe to benefit from Trump's pro-growth policies.
"As a Republican sweep of Congress becomes the base case for market participants, we see traders switching to a buy-everything-US-risk-related mindset," he said.
"The USD was always the cleanest expression of a Trump presidency, and even more so a 'red sweep'."
The dollar index, which measures it against the euro, yen and four other major currencies, eased 0.2% to 104.91, after jumping 1.53% in the previous session, the most since September 2022.
The dollar slid 0.37% to 154.055 yen, following a 2% rally overnight.
The euro added 0.14% to $1.0746 following its worst one-day slump since March 2020 on Wednesday, when it dived 1.82%.
German Chancellor Scholz is seeking support from the opposition conservatives in passing the budget and boosting military spending, after the falling out with the Free Democrats party. The leader of the Conservatives, which are far ahead in opinion polls, is due to respond in a news conference later in the day.
Sterling rose 0.41% to $1.2932, following a 1.24% slide on Wednesday.
The Bank of England is likely to cut interest rates by a quarter point on Thursday for only the second time since 2020 but the big question for investors is whether the BoE sends a signal about its subsequent moves after the government's inflation-raising budget.
Sweden's Riksbank is also expected to cut rates on Thursday, with most economists predicting a half-point move. Norway's central bank is expected to keep policy steady.
At the Fed, markets were still confident of a 25 basis-point cut on Thursday, but slightly reduced bets on further easing in December.
Trump's proposed tariffs and immigration policies risk stoking inflation, potentially hampering the path to lower rates.
"The big challenge for markets is that if you do see tariffs come through you need to balance the short-term nature of inflation risks with the medium-term aspect of lower growth," said Justin Onuekwusi, chief investment officer at investment firm St. James's Place.
"The market appears to be thinking about inflation right now."
Bitcoin caught its breath on Thursday, easing 1.6% to $74,770, following its vault to a record high $76,499.99 overnight. Trump had vowed to make the United States "the crypto capital of the planet."
Gold remained weak following Wednesday's more than 3% tumble, edging down to $2,656.17. However, that was still not far from its recent record high of $2,790.15.
Crude also succumbed to dollar strength on Wednesday, but clawed back some losses on Thursday, supported by risks to oil supply from a Trump presidency and a hurricane building in the Gulf Coast. [O/R]
Brent crude oil futures rose 0.35% to $75.18 per barrel. U.S. West Texas Intermediate (WTI) crude gained 0.22% to $71.85.