Asian markets experienced a period of relative calm as investors assessed the political landscape in France and South Korea. Meanwhile, Bitcoin achieved a significant milestone, exceeding $100,000 for the first time.
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The MSCI Asia Pacific index remained largely unchanged, with gains in Taiwan and Singapore counterbalancing losses in Hong Kong and India. South Korean equities declined as the ruling party worked to prevent President Yoon Suk Yeol’s impeachment. Japanese stocks also saw early gains diminish.
Bitcoin’s surge past the $100,000 mark followed President-elect Donald Trump’s appointment of a crypto advocate to lead the US Securities and Exchange Commission. This, coupled with positive global sentiment driven by Federal Reserve Chair Jerome Powell’s optimistic economic outlook and a rally in US tech stocks, helped offset concerns about political instability in South Korea and France. The S&P 500 reached a new record high, with market attention now turning to Friday’s non-farm payrolls data.
Political Headwinds and Economic Optimism
The South Korean won weakened as policymakers sought to reassure financial markets following the martial-law decree. The euro faced pressure due to political uncertainty in France, where far-right leader Marine Le Pen and a left-wing coalition voted against Prime Minister Michel Barnier’s administration.
“This type of political noise is really hard to forecast,” Park Seok Gil, JPMorgan’s chief Korea economist, commented on Bloomberg Television regarding the South Korean situation. He anticipated the budget, a key point of contention, would ultimately pass but might pose a near-term drag.
Singapore’s Straits Times Index, Southeast Asia’s top performer this year with an 18% gain, neared a record close driven by optimism in the banking sector and Robinhood Markets Inc.’s planned expansion into Singapore as its Asian base next year.
In China, the official Xinhua News Agency published articles ahead of a significant economic meeting, cautioning against prioritizing rapid growth and emphasizing the importance of boosting consumption.
US Treasury Yields and Market Reactions
US 10-year Treasury yields rose slightly in Asian trading after declining on Wednesday. The dollar index remained steady, while US stock futures dipped.
“If the US economy continues its strong performance, there’s potential for US asset appreciation due to the strong dollar,” Ken Wong, Asian equity portfolio specialist at Eastspring Investments Hong Kong Ltd., stated on Bloomberg Television. He suggested a robust US economy might lessen the perceived need for aggressive Fed rate cuts.
Powell’s Positive Outlook and Market Expectations
Federal Reserve Chair Jerome Powell’s comments describing the US economy as “in remarkably good shape” and noting decreased downside risks from the labor market contributed to the positive sentiment. He indicated the Fed could proceed cautiously with rate cuts toward a neutral level.
However, Powell’s optimism didn’t significantly shift market expectations of another rate cut at the Fed’s upcoming meeting. Krishna Guha at Evercore described Powell’s remarks as “slightly hawkish” but not enough to undermine market confidence in a December rate cut.
The Federal Reserve’s Beige Book also indicated slight economic growth in November and increased business optimism about future demand.
Commodities and Upcoming Events
Oil prices stabilized after a previous decline, with traders awaiting the OPEC+ meeting. Gold remained relatively unchanged. Key events for the week include Eurozone retail sales and US initial jobless claims on Thursday, followed by Eurozone GDP and the US jobs report and consumer sentiment figures on Friday.
Conclusion
While political uncertainties persist in Asia and Europe, positive economic indicators, particularly from the US, and Bitcoin’s surge past $100,000 have shaped market sentiment. Investors are now keenly focused on upcoming economic data releases, especially the US jobs report, for further direction.
