Written by Wayne Cole
SYDNEY (Reuters) – Asian stocks had a calm start to the week on Monday. That's as high U.S. Treasury yields challenged Wall Street's wealthy stock valuations while supporting the dollar near multi-month highs.
This week, the New Year holiday was approaching, so the volume was low, and the data diary was quite sparse. China's PMI factory survey will be released on Tuesday, while the US December ISM survey is scheduled to be released on Friday.
MSCI's broadest index of Asia-Pacific stocks outside Japan fell 0.2% but is still up 16% for the year. Although it fell by 0.9%, it will only increase by about 20% in 2024.
South Korea's main indexes have not been so lucky, suffering a storm of political uncertainty in recent weeks, forcing them to fall 9% for the year. The previous increase was 0.3%.
Shares of South Korean low-cost airline Jeju Air hit an all-time low on Monday after a plane crash that killed 179 people.
China's blue-chip companies rose 0.3%, up almost 16% year-on-year, but almost all of that gain came in just two weeks in September after the Chinese government promised more economic stimulus. is.
Eurostoxx 50 futures rose 0.1%, but and were little changed.
Both Nasdaq futures fell 0.1%. On Friday, Wall Street suffered a broad selloff with no apparent trigger, but volume was only two-thirds of the daily average. [.N]
It's up 25% year-to-date, while the Nasdaq is up 31%, making valuations significantly higher than the risk-free returns of U.S. Treasuries. Investors expect earnings per share growth in 2025 to be just over 10%, compared to an expected 12.47% in 2024, according to LSEG data.
But even though the Fed cut the cash rate by 100 basis points, the 10-year Treasury yield ended the year at 4.631%, near an eight-month high and about 75 basis points higher than it was at the beginning of the year.
“The continued rise in bond yields due to a reassessment of expectations for accommodative monetary policy is creating some concern,” said Quasar Elisundia, research strategist at brokerage Pepperstone.
“If the Federal Reserve were to continue restrictive monetary policy for a longer period of time than expected, this could weaken expectations for corporate profit growth in 2025 and, in turn, impact investment decisions.”
Bond investors may also be wary of a surge in supply as President-elect Donald Trump promises tax cuts with few concrete proposals to curb the deficit.
President Trump is expected to issue at least 25 executive orders when he takes office on January 20th, targeting issues ranging from immigration to energy to crypto policy.
Widening interest rate differentials sustained demand for the dollar, which appreciated by 6.5% over the year against a basket of major currencies.
The euro has fallen more than 5% against the dollar so far in 2024, sitting at $1.0427, not far from its recent two-year low of $1.0344.
The dollar is holding near a five-month high of 157.79 yen against the yen, with only the risk of Japanese intervention preventing it from testing the 160.00 yen barrier again.
The strong dollar has been a bit of a drag on gold prices, which are up 28% so far this year to $2,624 an ounce. [GOL/]
Oil had a tougher year, as concerns about demand, particularly from China, held down prices and forced OPEC+ to repeatedly extend agreements that limit supply. [O/R]
It rose 6 cents to $74.23 a barrel and rose 1 cent to $70.61 a barrel.
