Asian markets opened lower on Monday, weighed down by strong U.S. payroll data, surging bond yields, and a spike in oil prices. The dollar held near 14-month highs as investors digested the implications of robust economic signals and rising geopolitical tensions.
Global Market Highlights
Asian Market Performance
- MSCI Asia-Pacific Index: Edged down 0.4%.
- Nikkei Futures: Fell sharply to 38,430 compared to Friday’s cash close of 39,190 (holiday in Japan).
- South Korea’s KOSPI: Down marginally amid political uncertainty as the Constitutional Court deliberates on President Yoon Suk Yeol’s future.
- China’s CSI300 Index: Slipped 0.2% despite stronger-than-expected trade data.
Chinese Trade Data
- Exports surged 10.7% YoY in December.
- Imports recovered, rising 1% YoY.
- Trade surplus with the U.S. expanded to $105 billion, raising prospects of increased tariffs under the incoming U.S. administration.
U.S. Treasury Yields Surge
- Yields on 10-year Treasuries reached 14-month highs of 4.79%, trading at 4.764% in Asia.
- Rising yields are putting pressure on corporate earnings valuations and raising borrowing costs globally.
Impact on U.S. Markets
- S&P 500 Futures: Down 0.4%.
- Nasdaq Futures: Declined 0.5%.
- Major banks, including Citigroup, Goldman Sachs, and JPMorgan, are set to kick off the earnings season on Wednesday.
Fed Policy Expectations
- Markets now anticipate only 27 basis points of Federal Reserve rate cuts for 2025, with the terminal rate revised to 4.0% from the previous forecast of 3.0%.
- Barclays economist Christian Keller expects a single 25-basis-point cut in June, contingent on economic slowing and declining inflation.
Currency and Commodities Update
Dollar Strength
- The dollar maintained its rally, with the euro trading near $1.0230, its lowest since November 2022.
- Sterling fell to $1.2170, a 14-month low, amid concerns over fiscal policies under the Labour government.
- The dollar eased to 157.60 yen after hitting a six-month high of 158.88 yen.
Gold Prices
- Gold held steady at $2,688 per ounce, showing resilience against a stronger dollar and rising bond yields.
Oil Prices Surge
- Brent crude rose $1.19 to $80.94 per barrel.
- U.S. crude climbed $1.27 to $77.84 per barrel, driven by lower Russian exports and escalating sanctions from Washington.
Other Notable Developments
China Economic Outlook
- The People’s Bank of China relaxed rules on offshore borrowing to support the weakening yuan.
- Key economic data, including GDP, retail sales, and industrial output, are set to be released on Friday.
Geopolitical Concerns
- Russia seaborne oil exports dropped to their lowest since August 2023, adding pressure to global supply dynamics.
European Market Sentiment
- EUROSTOXX 50 futures eased 0.2%.
- FTSE futures declined 0.2% amid a rout in the gilt market due to rising fiscal concerns.
This week’s focus will be on U.S. consumer price data on Wednesday, Fed commentary, and earnings reports from major corporations, which could set the tone for global markets in the weeks ahead.
