Asian Markets Steady Amid U.S. Holiday, Dollar Weakens on Fed Rate Cut Bets

Asian shares hold steady as U.S. markets pause, while the dollar weakens on renewed Federal Reserve rate cut expectations. Investors monitor global trade and geopolitical tensions.

Asian Markets Hold Steady as Investors Monitor Global Trade and Geopolitics

Asian stock markets remained stable on Monday as U.S. markets observed a holiday, giving investors time to digest the latest economic developments. The U.S. dollar softened following a disappointing retail sales report, renewing speculation about two potential Federal Reserve rate cuts later this year.

Meanwhile, geopolitical tensions remain at the forefront, with reports suggesting Saudi Arabia is set to host discussions on the ongoing Russia-Ukraine conflict. However, uncertainties persist regarding which nations will participate and the potential outcomes of these talks.

U.S. Tariff Concerns Ease but Global Trade Worries Linger

The immediate risk of U.S. retaliatory tariffs has diminished, with no major policy changes expected until at least April. However, there is growing concern over the possibility of new levies based on value-added taxes (VAT) in other countries. Market analysts warn that such measures could have significant consequences for global trade and economic stability.

“The idea that the U.S. might impose an additional 20% tariff on all European Union imports, along with variable tariffs on other nations with VAT regimes, is a deeply concerning scenario for global growth,” noted Ray Attrill, head of FX research at National Australia Bank.

Adding to trade uncertainties, the European Commission is reportedly considering strict import controls on certain food products that do not meet its regulatory standards. This move appears to align with President Donald Trump’s reciprocal trade policy, signaling potential friction between the U.S. and European economies.

Asia-Pacific Stocks Show Mixed Performance

Investors expressed relief that no immediate tariff hikes have been implemented, contributing to modest gains in the region’s stock markets. The MSCI Asia-Pacific Index outside Japan edged up by 0.1%.

• Japan’s Nikkei 225 remained largely unchanged as investors assessed fluctuations in the yen.

• South Korea’s Kospi Index advanced by 0.2%.

• Hong Kong’s Hang Seng Index extended its strong performance from last week, rising 7% amid optimism about Chinese firms introducing cost-effective AI technologies to compete with Western counterparts.

Leading the charge in Hong Kong was Alibaba Group, which saw a remarkable 24% surge after announcing a strategic partnership with Apple to enhance artificial intelligence services in China. Alibaba’s earnings report, expected later this week, could further impact market movements. Analysts predict a 7.5% swing in the stock price following the announcement.

Meanwhile, European markets have attracted international investors, with the STOXX 600 Index climbing for eight consecutive weeks, marking an 8% gain since the beginning of the year.

U.S. Markets Pause, Dollar Weakens as Rate Cut Expectations Grow

With Wall Street closed for the holiday, S&P 500 and Nasdaq futures remained flat, indicating a cautious market sentiment. Despite a brief reaction to weak retail sales data last Friday, U.S. equities closed the week on a high note, with the S&P 500 up 1.5% and the Nasdaq gaining 2.6%.

Treasury yields fell after the lackluster sales report, reinforcing expectations of at least two Federal Reserve rate cuts in 2024. Investors are keenly awaiting the release of the Fed’s latest meeting minutes on Wednesday, which could provide further clarity on the central bank’s policy outlook. Additionally, remarks from six Fed officials scheduled throughout the week may influence market sentiment.

The yield on the 10-year Treasury note settled at 4.478%, significantly lower than last week’s peak of 4.660%. This decline in yields pressured the dollar, which posted a 1.2% loss last week, bringing the U.S. Dollar Index to 106.84.

The euro held steady at $1.0485, poised to challenge resistance at $1.0533. Meanwhile, the Japanese yen strengthened slightly to 152.02 per dollar following Japan’s unexpectedly strong economic growth report, which showed a 2.8% annualized expansion in the fourth quarter.

Global Central Banks and Economic Data in Focus

Investors are also eyeing critical economic data from the United Kingdom, including employment figures, wage growth, and consumer prices, which could shape expectations for the Bank of England’s next rate move. Governor Andrew Bailey is set to speak this week, offering further insights into the central bank’s stance.

In the Asia-Pacific region, central banks in Australia and New Zealand are both expected to cut interest rates, with Australia likely to reduce by 25 basis points and New Zealand potentially opting for a 50-basis-point cut.

Commodities: Gold Near Record Highs, Oil Faces Pressure

The commodities market reflected ongoing economic and geopolitical uncertainties:

• Gold remained near its all-time high at $2,879 per ounce, marking a seven-week rally as investors sought safe-haven assets amid global uncertainties.

• Oil prices faced downward pressure amid renewed hopes for peace talks between Russia and Ukraine, which could lead to eased sanctions on Russian oil exports.

  • Brent crude fell 36 cents to $74.38 per barrel.

  • S. crude declined 42 cents to $70.32 per barrel.

Looking Ahead: Key Market Drivers

This week’s market movements will largely hinge on upcoming Fed statements, global trade developments, and corporate earnings reports. Investors will closely monitor whether the Federal Reserve maintains its dovish stance, how geopolitical tensions evolve, and whether global economic data align with expectations.

With trade policies still uncertain and central banks adjusting their monetary strategies, market volatility remains a key theme for the months ahead. As global economies navigate these challenges, investors will need to stay agile in their strategies.

Source:  (Reuters)

(Disclaimer: The information in this article is based on publicly available data and market trends. It is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult official financial sources for the latest updates.)

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