Japanese stocks advanced on Friday, buoyed by a weaker yen, as investors digested mixed economic signals both domestically and internationally. The yen, which hit a five-month low of 158 per dollar in the previous session, recovered slightly following Tokyo inflation data showing a second consecutive month of acceleration in December. The currency’s depreciation has continued to support Japan’s export-driven economy.
Tokyo’s stock market rallied, aided by reports of smaller-than-expected declines in industrial output and stronger-than-anticipated retail sales. These indicators suggest potential resilience in Japan’s economy, keeping the prospect of further Bank of Japan (BOJ) policy tightening on the table. However, a summary of opinions from the BOJ’s December meeting revealed divisions among policymakers, particularly regarding uncertainties surrounding the U.S. economic outlook.
Elsewhere in Asia, markets showed a mixed performance. Hong Kong shares fluctuated after a two-day holiday, while mainland Chinese equities declined. Australia’s market posted gains, whereas South Korean stocks fell amid ongoing political turbulence.
Cautious Optimism Heading into 2025
“I think investors will continue to tread cautiously around Asian stocks going into 2025,” said Xin-Yao Ng, investment director at abrdn. He also highlighted uncertainties stemming from President-elect Donald Trump’s anticipated tariff announcements, which are expected to have both direct and indirect impacts on trade and inflation.
In South Korea, political turmoil has weighed heavily on business sentiment, with confidence levels plunging to their lowest since the onset of the COVID-19 pandemic. On the corporate front, Alibaba Group Holding Ltd. announced plans to merge its South Korean operations with E-Mart Inc.’s e-commerce platform, aiming to strengthen its position in the competitive online retail market.
U.S. Markets and Global Trends
On Wall Street, the S&P 500 closed flat Thursday, while the Nasdaq 100 slipped 0.1% in a subdued post-holiday trading session. U.S. megacaps struggled, though Apple Inc. saw gains following a positive note from Wedbush. GameStop Corp. rallied after a social media post from Keith Gill, famously known as “Roaring Kitty.”
Labor market data revealed a rise in recurring U.S. unemployment claims to their highest level in over three years, suggesting challenges for job seekers. Initial claims, however, edged down to 219,000 for the week ending December 21.
Treasuries remained stable, with the U.S. 10-year yield at 4.58%. Meanwhile, Bitcoin’s rally lost momentum as markets weighed President-elect Trump’s recent endorsement of cryptocurrencies.
Market strategist Jonathan Krinsky of BTIG predicted that the S&P 500 could reach a new all-time high above 6,100 before the year ends but warned of potential volatility in January. “If the S&P 500 does make new highs, there are going to be massive divergences in breadth and momentum, which is another red flag as we get into January,” he noted.
Commodities and Regional Developments
In commodities, gold held steady after hitting a one-week high on Thursday, while oil prices dipped. Thailand is set to release trade data, and in South Korea, a preliminary court hearing on the impeachment of President Yoon is scheduled, adding to the country’s political and economic challenges.
Japan Airlines Co. reported resuming ticket sales following a cyberattack on Thursday, reflecting continued vulnerabilities in the global cyber landscape.
As 2024 concludes, markets remain poised for both opportunities and challenges, with investors carefully monitoring global policy shifts and regional developments heading into the new year.
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