Asian stocks rise, dollar at two-year high as US rates, Trump in focus By Reuters
Written by Ankur Banerjee
SINGAPORE (Reuters) – Asian shares rose on Friday, aimed at easing a bleak start to 2025, while the dollar hit a two-year high against a basket of currencies as investors worried that U.S. rates remain high for too long.
MSCI’s broad index of Asia-Pacific shares outside Japan was up 0.33% but was down about 1% for the week. The index is up about 8% in 2024. Japanese markets are closed for the week.
Chinese stocks were flat on Friday after entering Thursday highlighting growing concerns about the Chinese economy and a possible trade war when Donald Trump takes office this month.
China’s blue-chip CSI 300 Index was up 0.16 in early trade after entering the weakest New Year since 2016 on Thursday. Hong Kong rose 0.19%.
“It’s been a tough time for financial markets towards the end of the year, but strange things can happen in the informal markets,” said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.
“I don’t think we should add to this performance. That said, a strong dollar and higher bond yields will weigh on the outlook and equity investors will hope that these changes soon.”
On Wall Street, US stocks closed higher on Thursday after initial gains failed to take hold. Shares of Tesla (NASDAQ: [.N]
The bad situation comes after the stuttering end of 2024, which led to a year-long rally fueled by expected growth coupled with artificial intelligence, expected rate cuts from the Federal Reserve, and more recently, the prospect of deregulation policies from the incoming Trump administration. .
But as the Fed last month rattled markets by unveiling fewer rate cuts than previously expected and growing worries that Trump’s policies could hurt inflation, bond yields rose, boosting the dollar and hurting stocks.
Vasu Menon, managing director of investment strategy at OCBC, said Trump’s pro-growth and pro-business agenda may boost the US economy but globally, it could be a challenge due to potential costs and a stronger dollar.
“Therefore, there is a certain level of caution and expectation in the markets especially after the strong performance of investments in the last two years,” Menon said.
Overnight data showed that the number of Americans filing new claims for unemployment benefits fell to an eight-month low of 211,000 last week, pointing to lower layoffs by the end of 2024 and consistent with a healthy labor market.
That’s a positive sign for the US economy, with wages and inflation data later this month likely to be the main focus for investors as they gauge how moderate the Fed’s rate-cutting approach may be.
Traders are pricing in a 44 basis point cut this year, less than the 50 bps the US central bank predicted in December.
That left the , which measures the US currency against six other units, at 109.2, just below the two-year high of 109.54 touched on Thursday. The index rose 7% through 2024 as traders adjusted their interest rate expectations.
Meanwhile the euro was among the biggest losers against the higher dollar, having fallen 0.86% in the previous session to a two-year low of $1.022475. It was at $1.0269 in Asian hours on Friday, pointing to a weekly decline of 1.6%, the worst since November. [FRX/]
The yen strengthened slightly to 157.295 per dollar, but was not far from the more than five-month low of 158.09 per dollar hit in December. The yen fell more than 10% last year, its fourth consecutive year of losses.
In commodities, oil prices rose on optimism about China’s economy and fuel demand after President Xi Jinping’s promise to boost growth.
futures rose 0.16% to $76.05 a barrel, while US West Texas Intermediate crude rose 0.18% to $73.25 a barrel.
Gold prices were firm at $2,658 per ounce, after rising 27% in 2024, their strongest annual performance since 2010. [GOL/]
