Asian stock markets got off to a cautious start on Monday, ahead of a week full of economic news that is expected to highlight the relative outperformance of the United States and support the dollar’s current upward trend.
Analysts expect an increase of 150,000 jobs and an unemployment rate of 4.2%.
These figures will be preceded by data on ADP hiring, job openings and weekly jobless claims, as well as surveys on manufacturing, services and consumer sentiment.
Any positive outcome would argue for an interest rate cut from the Federal Reserve, and markets have already reduced their expectations to just 40 basis points for 2025.
The minutes of the latest Fed meeting, scheduled for Wednesday, will offer color on the dot chart predictions, while there will be plenty of live commentary with at least seven top policymakers taking speaking, including influential Fed Governor Christopher Waller.
Inflation figures from the EU and Germany this week will sharpen prospects for further rate cuts from the European Central Bank, while consumer prices in China on Thursday are expected to support the case for further measures recovery in this country.
With such event risk, investors were understandably cautious, and MSCI’s broadest index of Asia-Pacific stocks outside Japan edged up 0.1%.
The Japanese Nikkei returned from vacation in a relaxed mood and rose slightly by 0.1%. South Korean stocks rose 0.3%, although the fate of President Yoon Suk Yeol was no clearer.
THE LUCKY FEW
Futures contracts for the S&P 500 and Nasdaq were a bit firmer in early trading.
Analysts at Goldman Sachs noted that the S&P 500 will have a total return of 25% in 2024, the second year it has risen above 20%, the last time this happened being in 1998-1999.
The rise has been limited, with almost half of the increase coming from just five stocks, but Goldman Sachs expects another 11% rise this year, thanks to a similar rise in profits. Reports for the latest earnings season begin to be released on January 15.
The US bond market was not so lucky and 10-year yields rose to 4.631%, close to last week’s eight-month high of 4.641%.
Investor appetite will be severely tested this week by the sale of $119 billion in new three-, ten- and three-year Treasury bonds.
The steady rise in yields kept the Dollar Index at 108.950, after rising nearly 0.9% last week to a high of 109.540.
The euro held steady at $1.0298, edging uncomfortably close to last week’s 26-month low of $1.0225. It now faces resistance around $1,0340 as trend-following funds continue to seek the psychological $1,000 level.
The dollar widened its advance last week to also sweep away the British pound, driving it to an eight-month low of $1.2349. The pound stabilized at $1.2420.
The risk of Japanese intervention held the dollar down to 157.63 yen, close to last month’s high of 158.09.
The strong dollar has been a hurdle for gold, holding the metal at $2,641 an ounce. [GOL/]
Oil was supported by colder weather in Europe and the United States, with a winter storm bringing snow, ice and freezing temperatures to much of the United States on Sunday. [O/R]
Brent rose 19 cents to $76.70 a barrel, while U.S. crude added 27 cents to $74.23 a barrel.
