(Dec 5): Asian equities were set for a mixed start as a lackluster day on Wall Street weighed on tech stocks and bonds and halted a rebound in bitcoin ahead of next week’s Federal Reserve (Fed) decision.
Equity index futures for Japan and Hong Kong inched lower, while those for Australia and mainland China rose. A gauge of US-listed Chinese stocks advanced 0.4% in New York trading Thursday, while the Nasdaq 100 fell by 0.1% and the S&P 500 climbed by the same margin. The yield on 10-year Treasuries rose three basis points to 4.1%, the dollar fluctuated and bitcoin dropped below US$93,000 (RM382,974).
One bright spot during the US session came from small-caps. The Russell 2000 Index of smaller companies climbed 0.8% to a record high, in a sign gains in the stock market are broadening to companies more sensitive to economic growth.
The muted moves underscore a cautious optimism supporting risk sentiment that has helped the S&P 500 rebound in the past two weeks to within 0.5% of its closing high. Those gains partly reflected easing concerns over tech valuations and confidence among traders that the Fed will deliver a 25 basis point interest rate cut next week in its last meeting of the year.
“The key question hanging over markets is whether a potential Federal Reserve rate cut next week can trigger a so-called Santa rally,” said Fawad Razaqzada at Forex.com. “For now, the S&P 500 forecast remains cautiously constructive, albeit with more hesitancy creeping in.”
Bets on a Fed reduction remained intact despite a slide in jobless claims — a noisy reading that captured the Thanksgiving period. Meta Platforms Inc shares jumped about 3.5% as Bloomberg News reported executives are considering budget cuts for the metaverse group.
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In Asia, data set for release includes household spending in Japan, inflation in the Philippines and Taiwan, and an interest rate decision in India. Markets are closed in Thailand.
Selling in US government bonds Thursday came as data showed signs of resilience in the jobs market. Applications for US unemployment benefits fell last week to the lowest in more than three years, indicating that employers are still largely holding onto workers despite a wave of recent layoffs. Separate data from Challenger, Gray & Christmas showed announced layoffs at US companies fell last month after surging in October, but were still the highest for any November in three years.
“Overall, the net takeaway from the data served to confirm the crosscurrents evident in the labor landscape,” said Ian Lyngen at BMO Capital Markets.
See also: Asian stocks poised to gain on rising US Fed cut bets
Federal reserve
Policymakers will not yet have the government’s November jobs report in hand for their meeting next week. The report, originally due Dec 5, was delayed until Dec 16 as a result of the record-long government shutdown. That release will also include October payrolls figures.
“There remain some negative payroll employment readings. But the US labor market is not collapsing based on timely data and reports that have leading indicator properties,” said Don Rissmiller at Strategas. “We continue to believe the Fed will cut the fed funds rate again by 25 basis points in December.”
While investors are largely betting policymakers will cut rates again, officials have rarely been so divided as many still prefer leaving rates elevated to keep inflation in check.
Before their meeting, Fed officials will get a dated reading on their preferred inflation gauge. On Friday, the September income and spending report — also delayed because of the government shutdown — is due to be released.
The figures will include the personal consumption expenditures price index and a core measure that excludes food and energy. Economists project a third-straight 0.2% increase in the core index. That would keep the year-over-year figure hovering just below 3%, a sign that inflationary pressures are stable, yet sticky.
“We continue to expect two rate cuts by the end of the first quarter of 2026, with Friday’s personal consumption expenditure index likely to show price pressures under control,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
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