Asia-Pacific Markets
Asia-Pacific equities started the week on a mildly positive note, recovering from last Friday’s Wall Street sell-off driven by robust U.S. economic data. The ASX 200 saw mixed performance as losses in tech, healthcare, and financials were offset by gains in utilities and consumer stocks. The Nikkei 225 declined following weaker-than-expected Machinery Orders and Friday’s currency strength, but losses eased as the yen weakened after comments from BoJ Governor Ueda. Chinese markets, including the Hang Seng and Shanghai Composite, posted gains as the PBoC’s liquidity support and positive earnings reports fueled sentiment. Chinese President Xi’s remarks on working with both the Biden and Trump administrations offered some geopolitical relief.
Key data releases included Japanese Machinery Orders, which contracted 0.7% MoM (vs. +1.9% expected), and Singapore’s non-oil exports, which fell sharply by 7.4% MoM (vs. +2.3% expected).
European Equities
European equity futures indicated a marginally positive open after last week’s declines. The Euro Stoxx 50 futures gained 0.1%, following Friday’s 0.8% cash market drop. Positive sentiment was driven by energy and commodity-related stocks, supported by firmer crude oil prices and resilient demand expectations. However, tech stocks underperformed as investors remained cautious about higher interest rate environments. The upcoming speeches from ECB officials, including Lagarde and de Guindos, are expected to provide clarity on the central bank’s inflation outlook.
US Market Outlook
US equity futures rebounded modestly after last Friday’s tech-driven losses, with Nasdaq 100 futures leading the recovery (+0.7%). Friday’s declines were triggered by stronger-than-expected retail sales and a surprising surge in NY Fed Manufacturing data, which fueled hawkish sentiment and reduced expectations for a December Fed rate cut. Pre-market focus remains on President Biden’s announcement to lift restrictions on Ukraine’s use of long-range U.S.-made missiles, a geopolitical shift with potential market implications.
In terms of leadership changes, President-elect Trump’s picks for key cabinet positions, including Chris Wright as Energy Secretary and Brendan Carr as FCC Chairman, alongside speculation about Kevin Warsh or Marc Rowan for Treasury Secretary, have kept investors attentive to policy shifts.
Fixed Income
Treasuries began the session under slight pressure, with 10-year UST futures edging lower after last week’s volatility. Japanese Government Bonds also experienced a choppy session after disappointing Machinery Orders data and comments from BoJ Governor Ueda signaling a cautious approach to rate hikes. European bonds were quiet, with Bunds trading in a tight range and UK Gilts underperforming amid ongoing concerns about the inflationary outlook and hawkish rhetoric from BoE policymakers.
Commodities
- Crude Oil: Brent crude traded in a narrow range near $72/bbl as markets balanced easing Middle East tensions with expectations of stricter U.S. sanctions on Iran under a Trump administration.
- Precious Metals: Spot gold rallied briefly but fell back from intraday highs near $2,600/oz, while silver followed a similar trajectory. Goldman Sachs reiterated its year-end 2025 gold target of $3,000/oz, citing geopolitical risks and inflation hedging demand.
- Copper: Copper posted modest gains, driven by positive risk sentiment in Asia, although upside was capped by concerns over slowing Chinese industrial demand.
Currencies
- DXY: The Dollar Index remained stable, hovering near 106.00, as traders awaited Fed commentary and December monetary policy signals.
- EUR/USD: The euro traded subdued near the 1.05 handle, reflecting cautious sentiment ahead of ECB speeches and lingering concerns about Eurozone economic recovery.
- USD/JPY: The yen weakened, with USD/JPY trading near 154 after BoJ Governor Ueda emphasized the importance of gradual adjustments to monetary policy while maintaining dovish undertones.
- GBP/USD: The pound attempted a recovery after slipping to multi-month lows, supported by a bounce from 1.2600 following last week’s disappointing UK GDP data.
- Antipodeans: The AUD showed resilience, supported by cross-currency flows in AUD/NZD, while the NZD remained range-bound amid a lack of domestic drivers.
Crypto
Bitcoin climbed overnight, reclaiming levels above $90,000. The broader crypto market remains buoyant, reflecting strong investor interest in alternative assets amidst geopolitical and inflationary uncertainties.
Notable Headlines
- Fed Commentary: Fed officials remained cautious on Friday, emphasizing data dependence for the December FOMC meeting. Fed’s Barkin highlighted progress on inflation but noted lingering uncertainties. Fed’s Goolsbee refrained from committing to a December pause or cut, stressing the need for further data.
- Geopolitics: President Biden lifted restrictions on Ukraine’s use of U.S.-made long-range missiles, a move expected to deter North Korean military support for Russia. Russia criticized the decision as escalating the conflict and warned of potential global repercussions.
- China-US Relations: Chinese President Xi held discussions with President Biden, emphasizing the need for stable relations and expressing readiness to work with the Trump administration. Xi reiterated key “red lines” on Taiwan and human rights, urging the U.S. to approach these issues cautiously.
- Middle East: Israel conducted strikes in Gaza and Beirut over the weekend, intensifying geopolitical tensions. Iran remained open to talks with the U.S. but warned against additional sanctions, indicating a preference for negotiation over escalation.
Notable Events Today
- ECB speeches from Lagarde, de Guindos, and Lane.
- Fed commentary from Goolsbee.
- German Buba Monthly Report.
- Auction of 12-month German bonds.
Markets will also watch for further developments in U.S. fiscal policy, geopolitical tensions, and potential announcements regarding U.S. Treasury Secretary appointments under the Trump administration.
