Asian markets started the week on a high note, following Wall Street’s rally driven by a dip in US inflation data that eased concerns over aggressive Federal Reserve rate hikes. With the Personal Consumption Expenditures (PCE) index rising just 2.4% year-over-year in November—below forecasts—traders are optimistic that inflation is inching closer to the Federal Reserve’s 2% target.
Major indexes in New York advanced over 1% by the end of the session, while markets in Asia mirrored the gains. Tokyo’s Nikkei 225 surged 1.2%, closing at 39,161.34, while Hong Kong’s Hang Seng Index climbed 0.8% to 19,883.17. The Shanghai Composite also saw a modest uptick of 0.2%, ending at 3,373.24.
Aside from the optimism around tempering inflation, bond markets offered further cheer. US Treasury bond yields, which had spiked last week, eased after the inflation report and remarks from Chicago Fed chief Austan Goolsbee, who pointed towards a controlled path back to the bank’s inflation target.
Currency Shifts and Commodities
The dollar took a hit, boosting rival currencies like the euro, pound, and yen. The euro rose to $1.0441, and the pound increased to $1.2580 against the greenback. Crude oil prices also edged higher, with West Texas Intermediate up 0.5% at $69.81 per barrel, and Brent crude climbing 0.4% to $73.25.
Government Shutdown Averted
Investor sentiment also perked up as US lawmakers negotiated a last-minute deal to prevent a potentially disruptive government shutdown. The agreement ensures essential federal services remain operational, sidestepping a scenario that could have affected up to 2.3 million federal workers.
President Joe Biden, while signing the bill into law, called it a fair compromise, stating, “This agreement represents a compromise, which means neither side got everything it wanted.”
What’s Next?
Despite the positive market response, some trepidation persists as former President Donald Trump prepares for his return to the White House in 2024. His proposed policies, including tax cuts and tariffs on imports, could inject fresh uncertainty into inflation progress. Experts also warn that his regulatory changes might reignite inflation and disrupt trade environments.
The Chief Market Strategist at Lazard cautioned, “Investors initially embraced the obvious tailwinds of reduced corporate taxes and deregulation. But dispersion within equity markets is expected as the trade policy picture becomes clearer.”
Key Figures
- Tokyo – Nikkei 225 closed UP 1.2% at 39,161.34
- Hong Kong – Hang Seng Index UP 0.8% at 19,883.17
- Shanghai – Composite UP 0.2% at 3,373.24
- New York – Dow closed UP 1.2% at 42,840.26
- London – FTSE 100 closed DOWN 0.3% at 8,084.61
Key Currencies and Commodities Rates
- Euro/US Dollar UP at $1.0441
- Pound/US Dollar UP at $1.2580
- Brent Crude UP 0.4% at $73.25 per barrel
This week holds promise for the global financial markets, with traders keeping a watchful eye on future updates around inflation, interest rates, and geopolitical developments.
For real-time updates, visit The Wall Street Journal or Financial Times.