The Asian markets showed a split trend on Friday, following a mixed day on Wall Street. Despite the continued decrease in US inflation reported in recent data, there was a lack of enthusiasm in the market to rekindle the buying momentum seen in November.
The start of the new month didn’t witness a rush back into trading following a challenging week that erased some of the gains made in the previous three weeks in the region. The losses persisted, despite the growing anticipation of a potential interest rate cut by the Federal Reserve in the first half of 2024. This anticipation stems from indications that the Fed’s efforts to manage inflation through tightening measures are starting to take effect.
On Thursday, further positive news on this front emerged with data showing a deceleration in the Personal Consumption Expenditures (PCE) price index, the Fed’s favored inflation gauge, during October. Other economic indicators also hinted at a softening in consumer spending and the labor market.
These readings suggest that the Fed might be successfully curbing inflation and slowing down the economy’s pace without causing a severe recession. Additionally, data from the eurozone indicated lower-than-expected inflation, potentially allowing the European Central Bank room to consider rate adjustments next year, prompting traders to await guidance from Fed chief Jerome Powell in his upcoming speech.
Despite the positive data, Fed officials have refrained from declaring an end to the prolonged period of rate hikes, expressing caution about the possibility of a resurgence in prices.
Although Wall Street had a mixed performance, November marked a strong month with notable gains for the Nasdaq and S&P 500, each up by approximately 10 percent. However, Asia’s performance in November was not as robust, and the region commenced December with subdued market activity. Specifically, Tokyo,
In the Asian markets, Hong Kong, Sydney, Seoul, and Jakarta experienced declines, whereas Singapore, Shanghai, Mumbai, Taipei, Manila, Bangkok, and Wellington saw gains. Concerns persist over China’s economic weakness despite efforts by authorities to stimulate growth.
While markets are heading for a third consecutive loss, investor apprehension continues due to the ongoing turmoil in China’s extensive property sector. James Fletcher from Ethos Investment Management highlighted the prevalent pessimism and a wait-and-see approach among investors.
Analysts maintain a positive stance on global equity prospects. Stephen Innes noted that investors acknowledge the Federal Reserve’s successful management of inflation without causing a severe recession, which was a significant concern in 2023. However, uncertainties loom due to geopolitical risks such as tensions between Russia and Ukraine, dynamics in the Middle East, the impending US Presidential election, and the lingering effects of prolonged higher interest rates.
Oil prices extended losses after OPEC and its allies agreed to further reduce output, leaving some uncertainties among traders. The plan included additional production cuts in the coming year, with Saudi Arabia extending its ongoing reduction. Observers pointed out that the measures were voluntary, raising questions about adherence, particularly from countries like Russia and certain African nations that initially opposed the cuts.
Market indices around 0700 GMT showed mixed results:
- Tokyo – Nikkei 225: DOWN 0.2 percent at 33,431.51 (close)
- Hong Kong – Hang Seng Index: DOWN 0.6 percent at 16,945.56
- Shanghai – Composite: UP 0.1 percent at 3,031.64 (close)
- West Texas Intermediate: DOWN 0.1 percent at $75.91 per barrel
- Brent North Sea crude: DOWN 0.2 percent at $80.67 per barrel
Currency exchange rates also experienced fluctuations:
- Dollar/yen: UP at 148.22 yen from 148.14 yen on Thursday
- Euro/dollar: UP at $1.0908 from $1.0889
- Pound/dollar: UP at $1.2635 from $1.2621
- Euro/pound: UP at 86.35 pence from 86.22 pence
In other markets:
- New York – Dow: UP 1.5 percent at 35,950.89 (close)
- London – FTSE 100: UP 0.4 percent at 7,453.75 (close)