Asian Markets Dip Amid China's Struggles, While U.S. Bonds and Dollar See Movements
Asian stock markets faced a downturn on Friday, primarily driven by losses in China. This decline occurred in the absence of Wall Street's input, which remained closed for the Thanksgiving holiday. Concurrently, the U.S. dollar experienced weakness, and Treasury yields saw a slight increase.
With Europe also entering a holiday mode, EUROSTOXX 50 futures showed little change, mirroring the steadiness in S&P 500 and Nasdaq futures.
In the geopolitical arena, Israel and Hamas initiated a four-day ceasefire, signaling a momentary pause in the intense conflict. As part of the ceasefire agreement, Hamas is expected to release 13 Israeli hostages, and humanitarian aid is set to enter the war-stricken Gaza region.
The MSCI's broadest index of Asia-Pacific shares outside Japan dropped by 0.6%, although it is still on track for a 0.8% weekly gain. This uptick, amounting to approximately 7% for November, reflects growing investor optimism that U.S. interest rates have peaked and may soon see reductions.
Japan's markets showed a contrasting trend, with the Nikkei index climbing 0.7% after a holiday break, aiming towards a 33-year high.
Japan's economic data indicated a slight increase in core consumer inflation for October, albeit lower than expected, while factory activity continued its contraction for the sixth consecutive month.
Chinese markets, however, experienced setbacks, with Chinese bluechips falling by 0.7% and Hong Kong's Hang Seng index dropping 1.4%. This decline reversed the substantial gains from the previous day, particularly among Chinese developers in Hong Kong, who lost 2% following a 6.4% surge due to Beijing's supportive measures for the struggling industry.
Shane Oliver, chief economist at AMP, commented on the market dynamics, suggesting a potential consolidation period after the rapid recovery, possibly impacting the traditional "Santa rally."
With U.S. markets closed for Thanksgiving, focus shifted to Europe, where euro zone PMIs slightly exceeded expectations, boosting the euro and European stocks. Sweden's central bank's decision to maintain rates led to a drop in the Swedish crown.
European Central Bank meeting minutes revealed expectations of decreasing inflation but emphasized the need for maintaining the prospect of a rate hike.
In bond markets, U.S. Treasury yields increased, with two-year yields rising to 4.9419% and ten-year yields reaching 4.4606%.
Currency markets remained relatively stable, with the dollar index nearing a three-month low. The sterling approached a 2-1/2 month high, influenced by strong business survey results and revised expectations regarding the Bank of England's rate cuts.
Oil prices continued their downward trajectory, with Brent crude futures decreasing by 0.2%. Gold prices saw a modest increase, trading at $1,993.63 per ounce.