Asian Stocks Decline, Dollar Strengthens Before US Thanksgiving

By an unknown author

SINGAPORE - Asian markets experienced a dip on Thursday, with a minor increase in the value of the dollar as investors evaluated recent U.S. economic data. This data revealed that while there has been some progress in controlling inflation, the momentum seems to have stalled, all while the economy shows signs of resilience. Additionally, increasing geopolitical tensions have contributed to a cautious risk sentiment among traders.

With the upcoming Thanksgiving holiday in the U.S. expected to result in a less active trading environment for the rest of the week, many traders are reluctant to make significant investments.

The MSCI's broad index, which tracks stocks in the Asia-Pacific region excluding Japan, reported a decrease of 0.4%, even as some stocks rallied by 0.48%.

Investor sentiment was still somewhat weak, especially as there are rising concerns about the potential for a tariff conflict stemming from the policies of President-elect Donald Trump. Alongside this, reports about explosions in Ukrainian cities have further unsettled the market.

In Europe, futures indicated a potential increase in stock markets, with Eurostoxx 50 futures climbing 0.57%. German stocks also appeared positive, up by 0.38%, while UK stocks were 0.17% higher.

During the European trading session, attention is expected to shift towards the French markets, where investors are concerned about the new government’s stability and budget plans. A significant drop in blue-chip stocks was noted, marking the lowest level since early August.

Recent data from the U.S. showed a slight increase in consumer spending for the month of October, surpassing market expectations. However, progress in reducing inflation rates appears to have stalled recently, which may pose challenges.

The difficulty in achieving the Federal Reserve's target inflation rate of 2%, combined with potential increases in tariffs on imports, could limit the possibilities for interest rate cuts in the coming year.

Despite widespread anticipation for a third interest rate cut by the Federal Reserve in December, minutes from the FOMC’s recent policy meeting showed divisions among officials regarding the necessity and extent of further cuts.

Kristina Clifton, an economist at Commonwealth Bank of Australia, expressed continued expectations for a 25 basis point rate cut at the next meeting. However, she noted that strong inflation figures for November could challenge the view of a downward trend towards the 2% target.

Currently, traders are estimating a 65% chance of a rate cut next month, while there are expectations for a total easing of 75 basis points by the close of 2025.

According to strategists at Macquarie, the outlook for inflation has become more uncertain, with possible tariff hikes from the upcoming Trump administration potentially reigniting inflationary pressures. They cautioned against drawing parallels with inflation trends from tariffs imposed in 2018 and 2019.

In a surprising move, South Korea's central bank opted for a rate cut for the second consecutive time, as the economy showed signs of stagnation and inflation dropped beyond the expected thresholds. Following the announcement, the value of the South Korean won decreased.

The Japanese yen traded lower, decreasing by 0.29% to reach 151.53 per dollar. However, it remains close to a one-month high previously achieved, with the currency set to record its best weekly performance since early September, fueled by rising expectations of a potential interest rate hike from the Bank of Japan next month.

The euro experienced a slight decline after previously rising by 0.7%, as investors temper their expectations around rate cuts following comments from European Central Bank board member Isabel Schnabel, suggesting rate cuts should be gradual and focus on neutral rather than accommodative positions.

The dollar index, which measures the U.S. currency against six other major currencies, was up by 0.11% at 106.23 after having dropped 0.7% in the prior session.

Within the commodities market, oil prices remained stable as concerns about supply disruptions from the Middle East eased due to a ceasefire agreement between Israel and Hezbollah.

Oil futures remained mostly unchanged at $72.8 per barrel, while U.S. West Texas Intermediate crude also stabilized at $68.7.

Gold prices remained stable at $2,634 per ounce; however, they are projected to see nearly a 4% drop for November, marking the weakest monthly performance in over a year.

stocks, dollar, market