Written by Lei Wee
SINGAPORE (Reuters) – Asian stocks started the year weak on Thursday, struggling with traction after a shaky close ahead of 2024, while the U.S. dollar held firm and Donald Trump Investor sentiment remained cautious ahead of the president’s return to the White House.
The new year started off poorly for stock markets, with uncertainty surrounding US President-elect Donald Trump’s policies and a more hawkish Federal Reserve outlook likely to dominate market rhetoric for now. It was happening.
Although global stocks ended 2024 with a significant annual increase of nearly 16%, they recorded a monthly decline of more than 2% in December.
MSCI’s broadest index of Asia-Pacific stocks outside Japan followed suit, falling 1.2% in December but rising more than 7% in 2024.
The index was last down 0.58% in Asian markets on Thursday, with volume dampened by a trading holiday in Japan.
However, stock futures suggested a positive start for Europe and Wall Street.
Eurostoxx 50 futures rose 0.74%, up 0.05%.
It rose by 0.48%. Nasdaq futures rose 0.67%.
“I think we’re in a bit of a twilight zone between now and January 20th,” IG market analyst Tony Sycamore said.
Trump will be inaugurated for his second term as President of the United States on January 20th.
“It’s very unusual for stocks to not be positive in December…and that’s a little worrying, because when the market is supposed to go up at a time like this and it doesn’t, it generally indicates that there are other concerns. Because it means something,’” Sycamore said.
“There’s a pretty common consensus that Trump is going to run the economy at breakneck speed.”
Chinese stocks were hit hard, with the blue-chip index down 2.65% and stock prices down 2.36% in the latest round.
Hong Kong fell 2.15%.
Investors are keeping an eye on China’s economic recovery in 2025 after officials promised a number of support measures to boost growth, but President Trump’s comments on tariffs of more than 60% on imports of Chinese goods could be a major headwind.
“China will continue to rely heavily on policy support to avoid another significant economic slowdown as domestic obstacles and external pressures are likely to increase,” said Yingrui Wang, China emerging markets economist at AXA Investment Managers. said.
“With President Donald Trump’s return to the White House amplifying external risks and an already fragile domestic economy, any delayed or misdirected stimulus could risk a debt-deflation trap that could lead to a generational recession.” may come dangerously close.”
In other regions, sales in South Korea remained unchanged. The index was Asia’s worst performer in 2024, dropping more than 22% in dollar terms due in part to the deepening political crisis.
dollar is stable
The safe-haven dollar hovered near a two-year high on Thursday amid this global uncertainty and expectations that the Federal Reserve will cut interest rates less this year.
The large interest rate differential between the United States and other countries is casting a shadow on foreign exchange markets, resulting in most currencies plummeting against the dollar in 2024.
The dollar rose 0.14% to 157.18 yen in the previous session, while the Japanese currency fell towards its lowest level in five months.
The euro rose 0.08% to $1.03615, not far from its one-month low.
Markets are currently pricing in about 42 basis points (bps) of Fed interest rate cuts this year, compared with more than 100 basis points for the European Central Bank and less than 60 basis points (bps) for the Bank of England.
“We currently expect the Fed to skip the rate cuts in January and May and instead cut rates in March and possibly June as well, increasing the rate by 25 basis points in 2025,” said Eli Lee, chief investment strategist at Bank of Singapore. “We expect the Fed to cut interest rates only twice.”
As the Japanese market was closed on Thursday, trading in spot U.S. government bonds ended, but there was little change in futures.
“We see further upward pressure on long-term U.S. Treasury yields, with our 12-month 10-year UST yield forecast at 5.00%,” Lee said.
In commodities, oil prices rose slightly on Thursday, with futures up 0.25% to $74.83 per barrel. US West Texas Intermediate crude oil rose 0.28% to $71.92.
One ounce traded 0.34% higher at $2,632.68. The yellow metal had a banner year in 2024, soaring more than 27%, posting its biggest annual gain since 2010.
