China inflation eyed, global political uncertainty bubbling up

A look at the day ahead in Asian markets.

Attention turns to China on Monday and the release of November inflation data, with global investor sentiment broadly upbeat as the relentless rally on Wall Street continues but tempered by an increasingly volatile geopolitical backdrop.

The toppling of Syrian President Bashar al-Assad and the uncertainty that unleashes on an already volatile Middle East, criminal charges against South Korean President Yoon Suk Yeol, and France’s political chaos are all potential reasons for investors to play it safe.

If so, US Treasuries and other government bonds, gold and the dollar may all see increased interest in early trading on Monday. The fast-moving events in South Korea could ripple across Asia, and the country’s finance ministry and central bank are expected to do all they can to ensure financial stability and protect the won.

The currency has weakened around 10% since the end of September, hitting a two-year low last week. A move through 1,445 won per dollar, which is eminently possible, will mark its weakest level since the global financial crisis in early 2009.

On the other hand, the prospect of further interest rate cuts from the US Federal Reserve and falling Treasury bond yields, combined with solid US employment figures on Friday, delivered yet another record high on Wall Street.

Global FX volatility may be on the rise, but measures of US equity and bond market volatility are the lowest in months. As long as that remains the case, Wall Street seems set to end a remarkable year on a firm footing.

Investors in Asia on Monday have their first opportunity to react to Friday’s US non-farm payrolls report which showed solid job growth but an uptick in the unemployment rate last month.

Rates traders appeared to have put more weight on the unemployment rate – they now fully expect a quarter point rate cut from the Fed on Dec. 18, and priced in an extra 10 bps of easing over the course of next year.

The main data focus on Monday in Asia will be consumer and producer price inflation from China. The pace of monthly consumer deflation is expected to have accelerated to -0.4% from -0.3%, and this would be the deepest rate of month-on-month price declines since March. Annual inflation is seen rising to 0.5% from 0.3%.

Producer prices, however, are expected to remain deep in deflationary territory with factory gate prices falling at an annual rate of 2.8% in November, little changed from October’s 2.9% fall.

Investors will also now be looking ahead to China’s upcoming Politburo meeting, where Beijing’s top policymakers will set out their priorities for the coming year. For investors, the government’s 2025 growth target and budget will be two of the most important.

Here are key developments that could provide more direction to markets on Monday:

– China producer, consumer inflation (November)

– Japan GDP (Q3, revised)

– Taiwan trade (November)

(Reporting by Jamie McGeever
Editing by Lisa Shumaker)

US Treasury yields mixed as investors wait for payrolls

NEW YORK – US Treasury yields were mixed on Thursday, with those on the front end of the curve trading higher, as investors looked ahead to Friday’s nonfarm payrolls report that could help determine the pace of the Federal Reserve’s current easing cycle.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 2.7 basis points to 4.148%. The yield on benchmark 10-year Treasury note reversed early gains and fell 0.6 basis points to 4.176% after the jobless claims report released on Thursday.

Markets slightly reduced the odds of a 25-basis point rate cut in this month’s meeting. CME’s FedWatch tool showed on Thursday a 70% chance of a December rate cut, lower than the 75% chance late on Wednesday.

The number of Americans filing new applications for unemployment benefits increased moderately last week, suggesting the labor market continued to steadily cool. Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 224,000 for the week ended Nov. 30, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week.

“Jobless claims were much ado about nothing; even with the 9,000 bump in the most recent filing week, claims remain at a very low level”, said Jason Ware, chief investment officer and chief economist at Albion Financial Group in Salt Lake City.

Markets are now shifting focus to data that can show a clearer picture of the job market, the nonfarm payrolls expected for Friday morning. Next week will have inflation indexes ahead of the December 17-18 Federal Reserve meeting.

“Between now and the meeting, there’s so much economic data, the payrolls on Friday, CPI and PPI next week, markets will look at the numbers as crucial to (the) Fed’s decision,” said Mike Lorizio, senior fixed income trader at Manulife Investment Management in Boston. Albion’s Ware thinks the labor market data are more important now to the Fed’s decision than the inflation data.

Fed Chair Jerome Powell appeared to signal on Wednesday support for a slower pace of rate cuts ahead, when he said the economy was stronger at this point than the central bank had expected in September. San Francisco Fed President Mary Daly added there was “no sense of urgency” on reducing borrowing costs further.

The breakeven rate on 10-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.271%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Tatiana Bautzer; Editing by Jonathan Oatis and Diane Craft)

Oil falls as investors weigh ample 2025 supply outlook, delayed OPEC+ output hike

HOUSTON – Oil prices fell on Thursday as investors weighed an ample supply outlook for next year against OPEC+ delaying its planned output increase by three months to April 2025.

Brent crude settled down 22 cents, or 0.3%, at USD 72.09 a barrel, while US West Texas Intermediate (WTI) settled down 24 cents, or 0.35%, at USD 68.30 a barrel.

OPEC+, the Organization of the Petroleum Exporting Countries plus allies including Russia, had been planning to start unwinding cuts from October 2024, but slowing global demand and booming production outside of the group forced it to postpone the plans on several occasions.

“There were questions coming into the meeting as to whether there was cohesion or not (among OPEC+), they are definitely coming out of this unified but this also shows the challenging supply landscape they have before them while trying to prop up this market,” said John Kilduff, partner at Again Capital in New York.

The gradual unwinding of 2.2 million barrels per day (bpd) of cuts will start from next April with monthly increases of 138,000 bpd, according to Reuters calculations, and lasting 18 months until September 2026. OPEC+ pumps around half the world’s oil.

“The overall signal to the market is constructive and will likely prevent any price downsides in the short term,” Rystad Energy’s global head of commodity markets for oil, Mukesh Sahdev, said in a note on Thursday.

But analysts pointed to an ample supply outlook for 2025 as offsetting support from Thursday’s OPEC+ decision.

“The market is facing a surplus, there is no shortage of oil and there is not really any flashing sign of what to look forward to in the future to rally prices,” said Bob Yawger, director of energy futures at Mizuho.

Meanwhile, a cooling US dollar was lending some support on Thursday. And expectations for the Federal Reserve to cut interest rates this month will further ease the dollar’s strength and support the oil market, StoneX energy analyst Alex Hodes said in a note on Thursday.

A stronger greenback makes dollar-denominated oil more expensive for investors holding other currencies, hurting demand.

In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if their truce collapses and its attacks would go deeper into Lebanon and target the state itself.

Meanwhile, Donald Trump’s Middle East envoy has traveled to Qatar and Israel to kick-start the US president-elect’s diplomatic push to help reach a Gaza ceasefire and hostage release deal before he takes office on Jan. 20, a source briefed on the talks told Reuters.

(Reporting by Georgina McCartney in Houston, Paul Carsten in London, Arunima Kumar in Bengaluru, and Jeslyn Lerh in Singapore; Additional reporting by Yuka Obayashi in Tokyo and Robert Harvey and Anna Hirtenstein in London; editing by David Evans, Jonathan Oatis, and Deepa Babington)

Indexes dip with UnitedHealth, tech, ahead of jobs report

US stocks ended lower on Thursday, with UnitedHealth down sharply and technology shares easing as investors awaited Friday’s jobs report.

The S&P 500 technology index fell 0.2% after hitting a record closing high on Wednesday, when all three major US stock indexes also notched closing highs.

Shares of Synopsys fell 12.4% after the chip design software firm forecast fiscal 2025 revenue below Wall Street expectations, in part due to a slump in China sales.

UnitedHealth’s UNH.N stock dropped 5.2% and was the biggest weight on the Dow and S&P 500, while the S&P 500 healthcare index fell 1.1%. Shares of Cigna were down 2.3%, while Molina Healthcare fell 3.2%.

Health insurance companies are reassessing the risks for their top executives the day after the murder of UnitedHealthcare CEO Brian Thompson in Manhattan. UnitedHealthcare is part of UnitedHealth Group.

Forecasters believe Friday’s employment report will show nonfarm payrolls increased by 200,000 jobs in November, a Reuters survey showed. In October, payrolls rose 12,000, the smallest rise since December 2020.

Data earlier in the day showed the number of Americans filing new applications for unemployment benefits rose slightly last week.

Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, Georgia, said investors are digesting recent economic data and looking ahead to Friday’s employment report.

“Obviously the Street is going to be trading on what the Fed is going to do,” he said.

The Dow Jones Industrial Average fell 248.33 points, or 0.55%, to 44,765.71, the S&P 500 lost 11.38 points, or 0.19%, to 6,075.11 and the Nasdaq Composite lost 34.86 points, or 0.18%, to 19,700.26.

On Wednesday, Federal Reserve Chair Jerome Powell said the US economy is stronger than the central bank had expected when it started cutting rates in September, and he appeared to signal support for a slower pace of reductions.

Markets are pricing in about a 70% chance of a quarter-point cut in interest rates this month.

Cryptocurrency and blockchain-related stocks lost steam after surging earlier in the day when bitcoin, the world’s largest cryptocurrency, stormed above the USD 100,000 mark for the first time.

MicroStrategy, the largest corporate holder of bitcoin, ended down 4.8%.

Declining issues outnumbered advancers by a 1.25-to-1 ratio on the NYSE. There were 378 new highs and 74 new lows on the NYSE.

On the Nasdaq, 1,488 stocks rose and 2,833 fell as declining issues outnumbered advancers by a 1.9-to-1 ratio.

Volume on US exchanges was 14.12 billion shares, compared with the roughly 14.7 billion average for the full session over the last 20 trading days.

(Additional reporting by Shashwat Chauhan and Purvi Agarwal in Bengaluru; Editing by Pooja Desai, Maju Samuel, and David Gregorio)

Gold slips as higher yields weigh; focus turns to US payrolls

Gold prices dipped on Thursday as US Treasury yields firmed after the release of weekly jobless claims data, while markets awaited US non-farm payrolls figures for fresh insights into the Federal Reserve’s stance on interest rate cuts.

Spot gold was down 0.7% at USD 2,630.30 per ounce, as of 02:03 p.m. ET (1903 GMT). US gold futures settled 1% lower at USD 2,648.40.

“We’re in a period of stagnation, some range bound activity at the moment, searching for that next piece of data or that next stimuli that could push gold out of this range,” said David Meger, director of metals trading at High Ridge Futures.

Benchmark US 10-year Treasury yields US10YT=RR edged up 0.3%, while bitcoin BTC= catapulted above USD 100,000 for the first time on Thursday.

The number of Americans filing new applications for unemployment benefits increased moderately last week, suggesting the labour market continued to steadily cool.

Investors’ focus now shifts to Friday’s US nonfarm payrolls, which is likely to increase by 200,000 jobs in the month after rising by only 12,000 in October, for further clarity on the interest rate path.

A robust NFP number is more or less priced in and if we see weakness in the report, it could add some support to gold prices, said Ole Hansen, head of commodity strategy at Saxo Bank.

Fed Chair Jerome Powell said on Wednesday the US economy is stronger than expected and suggested a more cautious stance towards interest rate cuts.

Traders are pricing in a 70% chance of a 25-basis-point cut at the Fed’s Dec. 17-18 meeting. Bullion, which offers no yield, tends to perform well in low-interest-rate environments.

Spot silver was down 0.5% at USD 31.12 per ounce, platinum fell 0.4% to USD 936.95 and palladium lost 1.4% to USD 964.40.

“Auto catalyst demand substitution from palladium to platinum has been the key headwind for palladium and is likely to continue into 2026,” ANZ analysts said in a note.

(Reporting by Sherin Elizabeth Varghese and Anushree Mukherjee in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)

India rate call in focus, political crises cool

India’s central bank interest rate decision grabs the spotlight in Asia on Friday, as investors digest yet another record high for the Nasdaq and adjust positions ahead of the weekend.

The US employment report for November later in the day is released after Asia closes, so investors across the continent may be inclined to square positions as best they can in preparation for Monday.

The main event in Asia on Friday is in India. The Reserve Bank of India is overwhelmingly expected to hold its key repo rate at 6.50%, after a sharp rise in inflation past the RBI’s 6% tolerance ceiling in October prompted many economists to push back their forecasts for the first cut to early next year.

With the rupee at record lows against the dollar, standing pat makes sense. But economists at Nomura, one of the five out of 67 houses in the Reuters poll predicting a rate cut, argue that weakening growth dynamics must be taken into account now.

Although the rupee has never been weaker, benchmark bond yields are at their lowest in almost four years, Indian stocks are lagging many of their regional peers, and the economy is growing at its slowest pace in nearly two years. Maybe the RBI should start the easing cycle sooner rather than later?

Investors go into the final trading session of the week against a relatively calm global backdrop, all things considered. Any market impact from the political ructions in South Korea and France appears to be fading and contained, and the dollar’s dip on Thursday will be welcomed too.

The dollar fell 0.5% on Thursday. It’s probably too early to read anything too deeply into it, but that was its third down day in a row, a losing streak not seen since September. It will take more than that – perhaps a return to the September lows, around 5% below current levels – to really call into question the dollar’s resilience, but could fatigue be setting in?

Fatigue is something the US economy doesn’t seem to be showing any signs of yet. The Atlanta Fed on Thursday raised its GDPNow model estimate for Q4 growth to a remarkable 3.3%. As investors fret about growth in Europe, China and many other key economies around the world, America appears to be the exception that continues to prove the rule.

This is a double-edged sword for Asia. On the one hand, it’s clearly good news as booming US markets should lift all others. But if it lifts the dollar and Treasury yields, then global financial conditions tighten and capital is sucked towards the US.

Indeed, net selling of Asian equities by foreigners in November was the highest since June 2022.

Here are key developments that could provide more direction to markets on Friday:

– India rate decision

– Japan household spending (October)

– South Korea current account (October)

(Reporting by Jamie McGeever; Editing by Deepa Babington)

US yields fall as markets see high odds of rate cut this month

NEW YORK – US Treasury yields fell on Wednesday, reversing course after softer economic data offset Federal Reserve officials’ comments, and markets continued to price in a 25-basis point interest rate cut in the US central bank’s December meeting.

Yields initially rose after St. Louis Federal Reserve President Alberto Musalem said inflation could take up to two years to get to the central bank’s target and that the pace of future actions has grown less clear.

However, the ADP National Employment Report showed private payrolls rose by 146,000 jobs last month, compared with the 150,000 estimate of economists polled by Reuters. The US services sector activity slowed in November after posting big gains in recent months, according to the Institute for Supply Management survey on Wednesday.

Fed Chair Jerome Powell also said earlier on Wednesday that
the economy is stronger than it had appeared in September, making policymakers potentially more cautious about lowering rates further. His remarks were likely his last before a quiet period for Fed officials prior to the Dec. 17-18 meeting beginning on Saturday.

Fed Governor Christopher Waller said on Monday he was “leaning toward” a cut, but others did not commit to the outcome.

“Markets are still expecting a 25-basis points rate cut in December, but the CPI and nonfarm payrolls will have their say,” said Vail Hartman, analyst at BMO Capital Markets in New York.

The benchmark US 10-year Treasury note yield US10YT=TWEB fell 3.7 basis points to 4.184%. The two-year yield, which typically moves in step with interest rate expectations, fell 3.9 basis points to 4.132%.

The US Treasury yield curve between two and 10-year notes US2US10=TWEB, an indicator of economic expectations, steepened to 4.8 basis points.

Yields extended declines after far-right and left-wing lawmakers
joined forces
to back a no-confidence motion against French Prime Minister Michel Barnier and his government, pushing the European Union’s second-biggest economic power deeper into a political crisis.

Nonfarm payrolls in November will be unveiled on Friday. The consumer price index data will be released next Wednesday. The odds of a 25-basis points rate cut were at 75.7%, according to CME’s FedWatch tool.

Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania, said yields have been volatile over the last week’s sessions, as investors followed comments from Fed officials.

“That said, I thought the ADP data came in somewhat benign; the most important jobs data will come on Friday.”

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.379% after closing at 2.395% on Tuesday.

The 10-year TIPS breakeven rate was last at 2.287%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Tatiana Bautzer and Chuck Mikolajczak; editing by Jonathan Oatis and Richard Chang)

Gold prices tick higher on benign US employment data

Gold edged higher on Wednesday after data showed US private payrolls rose at a moderate pace last month, while investors digested remarks from Federal Reserve Chair Jerome Powell and looked forward to Friday’s non-farm payrolls report.

Spot gold was up 0.4% at USD 2,654.03 an ounce by 02:15 p.m. ET (1915 GMT). US gold futures settled 0.3% higher at USD 2,676.20.

“Gold bounces as ADP disappoints, coming in just short of consensus. Market was looking for a bigger bounce a month after the hurricanes and the Boeing strike,” said Tai Wong, an independent metals trader.

Private payrolls rose by 146,000 last month, the ADP report showed. Economists polled by Reuters had forecast private employment increasing by 150,000 positions.

Powell said the recent performance of the economy will allow the US central bank to be more judicious with the future path of interest rate cuts.

Investors now await Friday’s pivotal US payroll report and next week’s inflation data for clues on the Fed’s policy trajectory.

Gold is seeing a muted reaction today, with a stronger impact expected from the upcoming US nonfarm payrolls and if data points to weakening employment it would support prices, said Everett Millman, chief market analyst with Gainesville Coins.

US central bankers on Tuesday signaled inflation is gradually heading toward the 2% target, hinting at potential interest rate cuts.

Traders are pricing in a 77% chance of a 25-basis-point cut at the Fed’s Dec. 17-18 meeting. Bullion, which does not pay any interest, historically performs well in low-interest rate environments.

Safe-haven gold was also supported by global geopolitical unrest, including South Korea’s political turmoil, France’s government facing collapse, relentless Russian drone strikes in Ukraine and Israel threatening war with Lebanon if its truce with Hezbollah collapses.

Spot silver rose 1% to USD 31.33 an ounce, platinum lost 1.3% to USD 940.6 and palladium was up 0.5% at USD 976.56.

(Reporting by Sherin Elizabeth Varghese in Bengaluru, additional reporting by Brijesh Patel and Swati Verma; Editing by Krishna Chandra Eluri)

Politics prove investors right on the ‘Korea Discount’

SINGAPORE – Global investors have always valued South Korea below other markets for reasons ranging from tensions with the North to the tight structures of its conglomerates – politics this week gave them cause to deepen that discount.

Korean stocks fell and the won plunged to two-year lows on Tuesday after President Yoon Suk Yeol shocked the world by declaring martial law in the export powerhouse.

The impact was short-lived. Parliament overturned the ruling within hours and markets stabilized. Yet, for investors, it was a reminder of the reasons Korean stocks and the currency have underperformed global markets for months.

“In the longer term, the martial law episode would accentuate the ‘Korean Discount’, an elevated risk premium with trading Korea-related assets, equities, FX and bonds,” said Daniel Tan, a Singapore-based portfolio manager at Grasshopper Asset Management.

“Investors could require a bigger risk premium to invest in the won and Korean equities.”

Korea’s legendary “discount” refers to how cheaply stocks in the KOSPI 200 index are priced relative to the assets companies hold, known as the price-to-book (P/B) ratio. A majority of companies listed on the KOSPI trade at a P/B below 1, way below peers. The MSCI world index trades at a ratio of 3.5.

The current political turmoil comes as Yoon and the opposition-controlled parliament clash over the budget and various scandals. By Wednesday morning, opposition lawmakers had vowed to impeach the president while the Chosun Ilbo newspaper reported the cabinet intended to resign en masse.

There are a few reasons for Korea’s perpetual discount.

One is the risk that comes from long-running tensions between North and South Korea.

Another is the nature of its businesses dominated by opaque family-run chaebols that seldom give out generous dividends.

The share price of biggest of them, chipmaker Samsung Electronics, is 9.2 times future earnings versus 18.5 for regional peer Taiwan Semiconductor Manufacturing Co. (TSMC).

The discount deepened this year as investors fretted over how exposed Korea is to China, whose anemic economy now faces fresh US trade tariffs. The won is down 9% this year against the dollar, while the KOSPI has shed 7%, both lagging their emerging market peers.

“Despite the market being cheap and having underperformed —which is usually an enticing factor for investors — there’s not enough to see the won stabilize,” said Sat Duhra, portfolio manager for Asian dividend income at Janus Henderson.

“Investors have been wary of the so-called ‘Korea discount’, and this only reinforces the sentiment. I don’t plan to add to Korea in this uncertainty.”

Foreign money has been leaving Korea’s stock market since August, with outflows in four months topping USD 14 billion.

Money has gone into its high-yielding bonds. Yet investors could now turn cool on those bonds if the political mess morphs into a Yoon impeachment, snap elections or higher spending commitments by the country’s two main political parties.

While authorities scrambled to prop up the won and calm financial markets on Wednesday, investors are still anxious about what comes next for the currency.

“Near term, you’ve got to think that it’s going to be difficult for the won to do particularly well: Terrible structural backdrop, the domestic economy looks weak, you’ve got the central bank likely coming in and doing more (easing) than was previously expected, and on top of that, political malaise,” said Rob Carnell, ING’s regional head of research for Asia-Pacific.

“The fact that just generally the dollar looks stronger than everything else by default (makes it) almost a perfect storm.”

(Additional reporting by Kevin Buckland in Tokyo, Summer Zhen in Hong Kong, and Gaurav Dogra in Bengaluru; Editing by Sam Holmes)

Tentative calm in Seoul, US juggernaut rolls on

As a degree of calm descends on South Korean markets, for now at least, Asia is set for a positive open on Thursday as investors also draw encouragement from another record high on Wall Street and US bond yields falling to the lowest in a month.

Federal Reserve Chair Jerome Powell’s upbeat remarks on Wednesday – that the US economy is in “remarkably” good shape and he feels “very good” about where US monetary policy is – will also support investor sentiment and risk appetite.

The S&P 500 rose for a fourth day on Wednesday for its 55th record high this year, and has now fallen only once in the last 12 trading sessions. The Nasdaq registered its second 1% gain this week.

US bond yields declined across the curve, most notably at the short end where the two-year yield fell to 4.12%. That’s the lowest since the US presidential election on Nov. 5, signaling that this particular leg of the so-called “Trump trade” has fizzled out.

The fall in yields, partly fueled by surprisingly soft US service sector data, was accompanied by a weaker dollar, offering a double dose of relief for Asian and emerging markets.

Investors will also draw comfort from the apparent financial stability in South Korea, even though the political situation remains extremely tense and fluid.

The won has recovered most of the losses that pushed it to a two-year low on Wednesday, and short-term implied won volatility has eased too. On the other hand, Kospi futures are still pointing to a fall of more than 1% for local stocks at Thursday’s open.

Meanwhile, market signals from China are also pointing to relative calm in FX but weakness in stocks. The yuan rebounded from a 13-month low to clock its biggest rise in a month on the onshore spot market, while weak service sector data and trade tensions with the US pushed stocks into the red again.

The Australian dollar remains on the back foot after GDP data on Wednesday showed that Australia’s economy expanded more slowly in the third quarter than was expected. That said, the central bank’s first rate cut is still not fully priced in until April, according to the interest rate swaps market.

The calendar in Asia on Thursday sees the release of revised South Korean GDP data, inflation numbers from Taiwan and the Philippines, retail sales from Singapore, and Australian trade.

As political uncertainty swirls in Seoul, it’s worth noting that Asia’s fourth-largest economy only narrowly avoided what would have been a rare recession, according to initial estimates, contracting 0.2% in Q2 and rebounding 0.1% in Q3.

Here are key developments that could provide more direction to markets on Thursday:

– Reaction to political developments in South Korea

– Fallout from the collapse of France’s government

– Taiwan, Philippines inflation (November)

(Reporting by Jamie McGeever; Editing by Diane Craft)

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