Asian equities saw modest gains on Friday, driven by positive economic data from China and a pullback in the U.S. dollar. The MSCI Asia Pacific Index rose 0.4%, marking its first gain of the week, buoyed by reports showing China’s retail sales grew at their fastest pace in eight months and property price declines slowed. In Japan, major indexes climbed around 0.8%, benefiting from a weaker yen, while U.S. futures saw slight declines.
The dollar’s strength, which had been a major driver of market trends this week, stalled on Friday, ending a five-day rally. This pullback came after Federal Reserve Chair Jerome Powell’s comments that the central bank is not in a rush to lower interest rates. The retreat in the dollar provided some relief to emerging market assets, which had faced significant selling pressure earlier in the week amid concerns over U.S. President-elect Donald Trump’s cabinet appointments and the uncertain pace of China’s economic recovery.
Salman Niaz, head of global fixed income for APAC ex-Japan at Goldman Sachs Asset Management, shared his view on emerging markets, noting that while the strong dollar had weighed on local currency bonds, opportunities remained in dollar-denominated debt. He speculated that a December rate cut by the Fed could be on the horizon, with at least two cuts expected next year.
U.S. Treasury yields saw little movement after surging the previous session, as traders adjusted their expectations for a December rate cut. Investors are awaiting further clarity on the Fed’s plans, with key retail sales data scheduled for release and several Fed officials set to speak in the coming days.
Emerging markets were under pressure this week, with a gauge of emerging market equities on track for its worst performance since June 2022. Meanwhile, an index tracking emerging market currencies came close to erasing all of its gains for the year.
In Asia, earnings reports were a mixed bag. Alibaba Group was scheduled to report later on Friday, following a more modest revenue growth report from JD.com. According to Jason Chan, Senior Investment Strategist at Bank of East Asia, China’s retail sales were “pretty good,” reflecting the impact of the People’s Bank of China’s stimulus measures from September. He also anticipated that more fiscal stimulus could be announced in December.
In the commodities markets, oil prices were poised for a weekly decline, pressured by the stronger dollar and concerns that global oil supplies could outpace demand next year, leading to a potential glut. Gold prices held near a two-month low.
Economic data from the U.S. earlier in the week revealed that producer prices had exceeded expectations, while jobless claims dropped to their lowest levels since May, indicating continued strength in the labor market. However, several U.S. policymakers have urged caution regarding further rate cuts, citing a robust economy, ongoing inflationary pressures, and broader economic uncertainty. This comes as the U.S. equity market shows signs of fatigue following a post-election rally, with some analysts warning of “stretched” optimism among traders.
In U.S. markets, the S&P 500 fell 0.6%, and the Nasdaq 100 declined 0.7%. Automakers such as Tesla and Rivian Automotive took a hit after Reuters reported that Trump plans to eliminate the $7,500 consumer tax credit for electric vehicle purchases. Meanwhile, Walt Disney Co. saw a boost, outperforming expectations with strong earnings results.
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