Asia’s stock markets slipped on Thursday in thin holiday trading, as the dollar gained ground alongside rising US Treasury yields, trimming some of the week’s earlier gains. With the year drawing to a close, trading volumes thinned, and investors remained fixated on the Federal Reserve’s rate outlook. Markets in Hong Kong, Australia, and New Zealand were closed for the holiday.
Following Fed Chair Jerome Powell’s comments signaling fewer rate cuts next year, traders now expect just a modest 35 basis points of easing for 2025. This shift has bolstered US Treasury yields and strengthened the dollar, which has weighed on commodities, including gold. The 10-year Treasury yield inched up to 4.613%, marking a 40 basis-point rise for the month, while the two-year yield firmed to 4.3489%.
“Given December’s hawkish stance, we expect the Fed to pause in January and await more data before resuming, or potentially ending, its rate-cutting cycle,” said Tom Porcelli, chief US economist at PGIM Fixed Income. “With the Fed shifting toward less accommodation, markets will likely focus more on economic data in the new year.”
On the currency front, the dollar hovered near a two-year high at 108.15 against a basket of currencies, on track for a monthly gain of over 2%. The Australian and New Zealand dollars were hit hardest, with the Aussie slipping 0.5% to $0.6238 and the Kiwi falling 0.58% to $0.5646. The euro also dipped 0.18% to $1.0399, while the yen languished near a five-month low at 157.35 per dollar.
In Japan, government bond sales are set to rise slightly next fiscal year, the first increase in four years, but yields barely moved in response, following the trend seen in US bond markets.
MSCI’s broad Asia-Pacific index outside Japan fell 0.1%, but was still poised to end the week up about 1.6%, reflecting Wall Street’s earlier gains. US stock futures showed modest gains, with the S&P 500 up 0.08% and Nasdaq futures rising 0.27%. Despite global geopolitical tensions and economic challenges, world stocks are set to end the year strong, driven by Wall Street’s massive rally fueled by AI growth and robust economic performance.
In commodities, gold edged up 0.5% to $2,626.19 an ounce, but the broader market remained cautious as the dollar’s strength continued to shape investor sentiment.
NEWS DESK
PRESS UPDATE