Asian equities retreated Friday, weighed down by limited clarity from a key Chinese economic conference and waning risk appetite ahead of the Federal Reserve meeting next week. Japanese and Australian markets saw losses, mirroring a Wall Street selloff that hit both stocks and government bonds Thursday. A benchmark index for Asian stocks is on track for its worst weekly performance in nearly a month.
The S&P 500 closed 0.5% lower as investors evaluated mixed U.S. economic signals, with higher-than-expected jobless claims contrasting against hotter-than-anticipated producer price index (PPI) data.
Disappointment Follows Chinese Economic Meeting
Stocks in China and Hong Kong slid after the Chinese Central Economic Work Conference concluded without delivering specific policy announcements or new economic measures. Officials did, however, pledge to increase the fiscal deficit target for 2024, signaling a commitment to bolstering growth.
“While there are some encouraging signs from the conference, such as prioritizing consumption, the market is still waiting for more innovative policies to boost confidence,” Hao Hong, partner and chief economist at Grow Investment Group, remarked on Bloomberg Television.
Currency and Bond Market Movements
The dollar index held steady, maintaining gains accrued over the past five sessions, buoyed by rising U.S. Treasury yields. Australian and New Zealand government bond yields also climbed on Friday.
The European Central Bank reduced its borrowing costs by 25 basis points as anticipated and hinted at potential additional cuts in upcoming meetings. Meanwhile, the Swiss National Bank surprised markets with a larger-than-expected 50 basis point reduction.
U.S. Economic Data Fuels Mixed Sentiment
Fresh U.S. economic data painted a murky picture of the economy’s health. Weekly jobless claims surpassed forecasts, while wholesale inflation data delivered mixed signals, with November’s uptick driven largely by a spike in egg prices.
Despite these developments, expectations for a Federal Reserve rate cut next week remain firm. The swaps market reflects a 95% probability of a 25-basis-point reduction in borrowing costs at the December meeting.
Chris Larkin of E*Trade at Morgan Stanley highlighted the labor market’s role in shaping monetary policy, noting, “While high egg prices drove the hotter-than-expected PPI, the rise in jobless claims may carry more weight as the Fed watches for any signs of a softening labor market.”
Regional and Commodity Updates
In Asia, upcoming data releases include Japan’s industrial production and Thailand’s gross international reserves, while China’s money supply figures are expected by December 15.
Political tensions weighed on South Korea’s won after the opposition party filed a second impeachment motion against President Yoon Suk Yeol.
In commodities, crude oil prices continued to slide, extending Thursday’s losses. Concerns over a potential supply surplus in 2025 overshadowed immediate geopolitical risks. Gold prices rebounded after suffering their steepest drop in two weeks, and Bitcoin hovered near the $100,000 mark.
This cautious market environment underscores the ongoing balancing act investors face between economic data, central bank signals, and geopolitical developments.
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