Asian stock markets experienced declines on Monday, driven by investor adjustments to expectations for prolonged high interest rates following robust US economic data.
Asian stocks experienced losses on Monday as investors adjusted their outlooks for prolonged high interest rates. This shift followed robust US economic data released last week. Equities in Australia, Hong Kong, mainland China, India, and South Korea all declined on Monday morning. The US payrolls report on Friday indicated a substantial addition of 256,000 jobs in December, surpassing expectations and prompting traders to reduce anticipations for rate cuts by the Federal Reserve.
The dollar index, which measures its value against the yen, pound, and other major currencies, reached a two-year high on Friday. A stronger US economy could potentially impede the Fed's pace of interest rate reductions, thereby diverting investment away from other markets, including Asia. 'People are taken aback by the economic strength in the US,' stated Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas. 'With US interest rates so elevated, we'll witness a liquidity drain in Asia, as capital flows to the US or remains there.' Australia's S&P/ASX 200 index fell 1.3 percent, while South Korea's Kospi declined 1.1 percent. India's Sensex index dropped 0.8 percent. The Japanese market was closed on Monday. 'Emerging market equities generally perform better when US interest rates are lower,' said Sunil Tirumalai, head of Asian equity strategy at UBS. 'In fact, they are more susceptible to US rates than US equities themselves.' Hong Kong's Hang Seng retreated 1.4 percent, while mainland China's CSI 300 declined 0.5 percent. 'The onshore market remains relatively resilient in comparison to external noise,' said Lui, noting that mainland investors are still transferring funds from low-yield savings accounts into the equity market. Nevertheless, mainland Chinese equities have gradually decreased by 17 percent since reaching a peak on October 8 last year, as hopes for a substantial stimulus package from Beijing waned and concerns regarding the economic impact of Donald Trump's second term emerged in the market. 'Some stimulus measures have been a welcome surprise,' acknowledged Tirumalai, who recognized that China was still in a 'bear market.' 'The extension of the trade-in scheme to a broader range of consumer goods, for instance, arrived sooner than anticipated.' Oil prices surged to a four-month high after the US implemented sweeping new sanctions on Russian oil on Friday. Prices for Brent crude, the international benchmark, climbed 1.6 percent to $81 a barrel, while the US gauge West Texas Intermediate gained 1.7 percent to $77.90 a barrel
ASIAN STOCKS INTEREST RATES US ECONOMY INVESTOR SENTIMENT EMERGING MARKETS
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