Asian Stocks Rise as US Data Stoke Rate Cut Bets

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(Bloomberg) — Asian stocks rose after the Federal Reserve’s preferred measure of inflation came in below expectations, reigniting bets on an interest rate cut. The dollar stabilized.

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The MSCI Asian stock index halted a six-day decline, with benchmark indexes in Japan and South Korea rising about 1%. Stocks in mainland China opened higher. US stock futures rose after the S&P 500 index advanced 1.1% on Friday, with personal consumption expenditures increasing at the slowest pace since May.

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Monday’s market moves provide investors some respite after a series of strong US economic data led to the Federal Reserve tapering the number of cuts it expects in 2025. The overall mood remains cautious as investors eye the inauguration of Donald Trump and the possibility of sweeping global tariffs, bringing It adds to an already difficult time in Asia as sentiment towards Chinese assets deteriorates.

“Lower-than-expected U.S. PCE core inflation data for November suggests the Fed may be too negative on inflation,” Shane Oliver, head of investment strategy and chief economist at AMP Ltd., wrote in a note to clients. “Our overall assessment remains that the trend in equities remains bullish, including Australian equities, but we expect a more volatile and restricted ride over the next year.”

The Australian 10-year bond yield fell seven basis points on Monday, after US Treasuries rose following personal consumption expenditures data on Friday. Treasury bonds witnessed little change in Asian trading.

The Bloomberg dollar gauge was steady after falling 0.5% on Friday. President Joe Biden has signed funding legislation to keep the US government running through mid-March, avoiding a year-end shutdown and pushing future spending decisions into a Donald Trump presidency.

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Asian stocks are on track for their first quarterly loss since September 2023 while a gauge of the region’s currencies fell to its lowest levels in more than two years last week. China’s one-year bond yield fell below levels last seen in the global financial crisis on Friday, as traders stepped up their bets on monetary easing.

“The recent weakness in the FX market in Asia, in our view, is largely due to support for the dollar, a significant shift in the Chinese government’s stance towards a somewhat loose monetary stance” and a deterioration in the overall growth outlook, especially in South Korea. said Wei Khun Chong, chief market strategist for the Asia-Pacific region at the Bank of New York in Singapore. “Asian coins are cheap, but be careful not to catch a falling knife.”

In corporate news, shares of Singapore Post Ltd fell. After the company fired several senior leaders following allegations surrounding its international e-commerce parcel logistics business. In Japan, Honda Motor Co. and Nissan Motor Co. aim to finalize the agreement to merge the two companies in June, according to NHK.

Elsewhere, oil prices stabilized after a weekly decline as traders sensed Trump’s threat to reimpose US control of the Panama Canal.

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Main events this week:

• Singapore Consumer Price Index, Monday
• Taiwan industrial production, unemployment rate, Monday
• UK GDP, Monday
• The Bank of Canada releases a summary of deliberations on Monday
• Mexican Trade, Monday
• The Reserve Bank of Australia publishes the minutes of its December interest rate meeting on Tuesday
• Christmas Day, Wednesday
• Bank of Japan Governor Kazuo Ueda addresses the Keidanren Council on Wednesday
• Initial unemployment claims in the US, Thursday
• The Central Bank of Colombia publishes the minutes of its interest rate meeting on Thursday
• Japan, Tokyo CPI, unemployment, industrial production, retail sales, Friday
• The Bank of Japan publishes a summary of its December meeting views on Friday
• A South Korean court will hold a preliminary hearing on the impeachment of President Yeon Suk-yeol over his declaration of martial law, on Friday
• Unemployment in Brazil, Friday

Some key movements in the markets:

Stocks

• S&P 500 futures rose 0.3% as of 10:36 a.m. Tokyo time.
• Japan’s Topix index rose 0.8%.
• Australia’s S&P/ASX 200 index rose 1%.
• The Hang Seng Index in Hong Kong rose 0.8%.
• The Shanghai Composite Index rose 0.2%.
• Euro Stoxx 50 futures fell 0.1%
• Nasdaq 100 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• There was little change in the euro at $1.0433
• The Japanese yen fell 0.1 percent to 156.51 yen to the dollar
• There was little change in the yuan in external transactions at 7.2987 to the dollar
• There was little change in the Australian dollar at 0.6254 US dollars

Cryptocurrencies

• Bitcoin fell 0.4% to $94,718.86
• Ether was little changed at $3,281.54

Bonds

• The yield on 10-year Treasury bonds was little changed at 4.53%.
• The Australian 10-year bond yield fell eight basis points to 4.42%.

Goods

• West Texas Intermediate crude rose 0.5% to $69.79 a barrel
• Gold in spot transactions fell 0.1 percent to $2,619.39 per ounce

This story was produced with assistance from Bloomberg Automation.

—With assistance from Matthew Burgess.

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