Asian markets diverge as investors react to US economic data

On November 28, 2024, Asian markets showed mixed results as investors reacted to various factors influencing the economy. Following a muted performance in the United States stock markets, where major indexes ended in the red, Asian traders witnessed a drop in Treasury yields that prompted them to reconsider their positions. The US consumer inflation data, which indicated a steady 2.3 percent increase in the personal consumption expenditures index, reassured investors about the stability of the market. This decrease in yields coincided with the approach of the Thanksgiving holiday in the US, creating a subdued trading atmosphere in New York and allowing Asian markets to take a breather. Notably, the outlook appears challenging; President-elect Donald Trump is assembling a hawkish cabinet that is expected to take a tough stance on international trade, including potential tariffs on China, Canada, and Mexico. This news has raised uncertainty among investors, leading to speculation on how Trump's tax cuts and tariff plans could impact rate cuts by the Federal Reserve, with futures markets suggesting about a two-thirds chance of a 25 basis point cut in December. While some Asian indexes, including Tokyo, Sydney, and Singapore, recorded gains, others such as Wellington, Taipei, and Manila faced declines. Seoul remained steady, reflecting indecisiveness following an interest rate cut by the South Korean central bank. In Hong Kong and Shanghai, declines were also observed as traders anticipated fresh stimulus measures from the Chinese authorities at an important upcoming meeting. Analysts expressed skepticism regarding these anticipated measures, as prior expectations were often unmet, in light of China’s ongoing economic struggles. The economy remains unbalanced, with a robust export sector offset by weaknesses in the property market and low consumer spending. Steven Cochrane from Moody's Analytics noted that consumer confidence continues to falter, particularly concerning labor market expectations. Despite the Chinese government implementing various policies aimed at sparking growth through interest rate reductions and property market support measures, significant underlying issues are still unresolved. The landscape poses increasing risks, particularly with the Trump administration signaling a shift in trade dynamics. Additionally, the cryptocurrency market has shown resilience, as Bitcoin has rebounded to hover around $96,500, following a period of decline earlier in the week. This latest wave of activity was attributed to speculation that the new administration may ease restrictions on digital currencies, fueling expectations that Bitcoin could surpass the $100,000 mark. Overall, the mixed trading results in Asian markets reflect a combination of domestic economic factors and external influences, notably from the US, as traders remain cautious yet optimistic about future developments.