Asian Markets Cautious as Political Tensions Rise: Markets Wrap

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(Bloomberg) — Asian stocks braced for a mixed open on Monday as traders grapple with ongoing political turmoil in South Korea and await signs of fresh stimulus from Beijing. Oil stabilized after the overthrow of the Syrian government.

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Australian stocks and Hong Kong stock futures fell while stocks in Japan and mainland China rose. US contracts were little changed after the S&P 500 advanced on Friday following a jobs report suggesting the labor market is slowing enough to allow the Federal Reserve to cut interest rates this month. The dollar stabilized against its major counterparts in early trading.

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Investors are bracing this week for a final wave of central bank decisions across four continents, a key meeting of Chinese officials and US inflation data in a bid to support returns for the year and help guide positions into 2025. Global stocks have been measured to have returned more than 20% this year, and are on track. for a second straight big return, according to data compiled by Bloomberg.

Chris Weston, head of research at Pepperstone Group Ltd, wrote: In Melbourne, in a note to customers: “It will be a lively week with the risk of events throughout the store.” “A hot US CPI reading may not necessarily derail a cut at next week’s FOMC meeting” but it could influence expectations for further easing and a move in the dollar.

In Asia, South Korean assets may move as some lawmakers demand the resignation of President Yeon Suk-yeol amid mounting public anger over the brief imposition of martial law last week. Opposition lawmakers said they would push for another vote to remove Yoon after the first vote failed.

Meanwhile, the People’s Bank of China’s daily fixing of the yuan will be analyzed after the central bank signaled support for the currency with a series of strong stabilizations last week. This comes ahead of consumer and producer price data that may indicate a slowdown in demand in the world’s second-largest economy and adds to expectations of more fiscal support from the Central Economic Work Conference, which is scheduled to begin on Wednesday.

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“There is a reasonable argument that China may have been keeping its powder dry waiting for US trade policy changes from January,” Barclays strategists led by Themistocles Viotakis wrote in a note to clients. Since there is room for some dollar easing, “yuan depreciation pressures should also temporarily ease given the People’s Bank of China’s resistance at around 7.30” per dollar.

The Middle East

Crude was little changed after Saudi Arabia cut prices for buyers in Asia by more than expected after OPEC+ delayed a production increase. The moves may decline as markets assess the repercussions of the overthrow of the government of Syrian President Bashar al-Assad by opposition groups, a strong blow to main backers Russia and Iran, which could reshape the region as conflicts continue.

Treasuries continued their recent rebound on Friday, with investors getting relief from the sell-off that peaked in November as Donald Trump’s presidential win raised inflation risks. But since then, yields have fallen amid speculation that the Fed will ease policy again at its meeting this month, its last before Trump takes office, as it tries to steer the economy toward a soft landing.

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In response to potential tensions between the incoming administration and the US central bank, Trump told NBC’s Meet the Press on Sunday that he has no plans to replace Fed Chairman Jerome Powell once he returns to the White House. Markets now expect a roughly 80% chance of Fed cuts at its December meeting, though officials have warned about the pace of further cuts.

The Fed’s forecasts do offer a gradual pace of easing, “but even slower cuts and perhaps a pause may be justified,” economists at Société Générale, including Klaus Baader, wrote in a note to clients. “We expect a 25 basis point rate cut at the December FOMC meeting, but even that depends on the upcoming CPI.”

Elsewhere this week, Australia’s central bank is likely to keep its key interest rate unchanged amid signs the country’s economy is starting to slow. The European Central Bank, Bank of Canada and Swiss National Bank are expected to ease policy, while Brazil’s central bank may raise interest rates to stem inflation pressures.

In other commodities, gold rose in early trading on Monday after China’s central bank expanded its gold reserves in November, ending a six-month pause in purchases.

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Main events this week:

• Japanese GDP, Current Account, Monday
• China Producer Price Index, Consumer Price Index, Monday
• Consumer price index in Mexico, Monday
• Australian interest rate decision, Tuesday
• German Consumer Price Index, Tuesday
• Consumer price index in Brazil, Tuesday
• Japanese Producer Price Index, Wednesday
• Chinese leaders are expected to hold the annual Central Economic Work Conference, starting Wednesday and continuing until December 12
• Reserve Bank of Australia Deputy Governor Andrew Hauser speaks on Wednesday
• US Consumer Price Index, Wednesday
• Interest rate decision in Canada, Wednesday
• Interest rate decision in Brazil, Wednesday
• Unemployment in Australia, Thursday
• Indian Consumer Price Index, Thursday
• The European Central Bank’s interest rate decision in the euro zone, Thursday
• Interest rate decision in Switzerland, Thursday
• French CPI, Friday
• Industrial production in the eurozone, Friday

Some key movements in the markets:

Stocks

• S&P 500 futures were little changed as of 8:16 a.m. Tokyo time
• Hang Seng futures fell 0.6%
• Australia’s S&P/ASX 200 index fell 0.4%.

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%.
• There was little change in the euro at $1.0566
• There was little change in the Japanese yen at 149.94 to the dollar
• There was little change in the yuan in external transactions at 7.2800 to the dollar
• The Australian dollar rose 0.1 percent to $0.6400

Cryptocurrencies

• Bitcoin rose 0.4% to $100,443.18
• Ethereum rose 0.1% to $3,998.83

Bonds

• The yield on Australian 10-year bonds fell by one basis point to 4.21%.

Goods

• There was little change in West Texas Intermediate crude
• Spot gold rose 0.3 percent to $2,641.65 per ounce

This story was produced with assistance from Bloomberg Automation.

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