Asian stocks extended a tech-driven rally, bolstered by a weaker yen, though trade tensions and US-China frictions kept investors on edge. Regional equities climbed 0.4%, led by a surge in chip-related stocks after Nvidia CEO Jensen Huang’s unveiling of new products fueled optimism around artificial intelligence (AI) demand. In contrast, US futures dipped slightly after the S&P 500 gained 0.6% on Monday and the Nasdaq 100 saw a 1.1% increase.
However, mainland Chinese and Hong Kong stocks diverged from the regional trend. Tencent Holdings Ltd. dropped as much as 7.3%, while Contemporary Amperex Technology Co. (CATL) saw a 6% decline following a Pentagon announcement designating them, along with several other Chinese companies, as military-linked entities.
The yen experienced some recovery after Japan’s Finance Minister Katsunobu Kato issued a warning against sudden, one-sided foreign exchange movements. The yen fell 0.3% to 158.11 per dollar, recovering slightly from a low of 158.42, its weakest point since July.
Rising US-China Tensions and Market Uncertainty
Investors are increasingly concerned about escalating US-China tensions. Former President Donald Trump denied reports suggesting he might soften plans for widespread tariffs if he returns to the White House, adding uncertainty to global trade dynamics. The recent US move to blacklist Chinese companies, including major oil company Cnooc Ltd. and leading shipping firm Cosco Shipping Holdings, highlights the mounting frictions between the world’s two largest economies.
Kieran Calder, head of equity research for Asia at Union Bancaire Privee, noted that the strength in Asian markets today is driven by tech stocks, particularly in Japan and Taiwan, buoyed by robust performance in the US semiconductor sector. Huang’s keynote address introduced new GeForce graphics processors for gaming PCs, further sparking investor enthusiasm for the tech sector.
US Dollar and Treasury Yields Mixed Amid Global Concerns
The US dollar index rebounded from an earlier loss after Trump’s tariff comments, narrowing its Monday decline to 0.6%. The greenback remained stable in Asian trading on Tuesday. Meanwhile, US Treasury yields saw modest increases, with the 30-year bond yield rising to its highest point in more than a year. The benchmark 10-year Treasury yield climbed three basis points to 4.63%.
In Canada, the dollar remained flat after Prime Minister Justin Trudeau announced his resignation as leader of the Liberal Party.
Credit Markets Heat Up
Global credit markets have shown remarkable early-year activity, with spreads narrowing to their lowest levels in 17 years. Borrowers in the Asia-Pacific region raised approximately $7 billion in dollar-denominated debt on Monday, the largest amount since last June. The trend is expected to continue, with a dozen issuers in the APAC region preparing for further debt sales or marketing in US dollars.
US Jobs Report Looms Large
Investors are also keeping a close eye on Friday’s US jobs report, which is expected to show that hiring slowed as the year ended, though the labor market remains relatively healthy. This data is unlikely to shift the Federal Reserve’s view that it can reduce the pace of rate cuts, given the economy’s resilience and persistent, though slowly decreasing, inflation pressures. Fed Governor Lisa Cook emphasized on Monday that policymakers can move cautiously due to the strong labor market and ongoing inflation challenges.
Bitcoin Surpasses $100,000
Meanwhile, Bitcoin hit a milestone, surpassing $100,000. Oil prices stabilized after falling for the first time in six sessions, as technical indicators suggested the recent rally may have reached its peak.
Key Market Events This Week
Tuesday: Eurozone CPI, unemployment; US job openings, trade, ISM services; Fed’s Thomas Barkin speaks
Wednesday: Eurozone PPI, consumer confidence; US ADP employment, Fed minutes, consumer credit; Fed’s Christopher Waller speaks
Thursday: China CPI, PPI; Eurozone retail sales; US state funeral for former President Jimmy Carter
Friday: Japan household spending, leading index; US jobs report, consumer sentiment
Market Movements
Stocks: Japan’s Topix rose 1.3%; Australia’s S&P/ASX 200 gained 0.2%; Hong Kong’s Hang Seng fell 1.9%; Shanghai Composite lost 0.3%
Currencies: The Bloomberg Dollar Spot Index remained stable; the euro was unchanged at $1.0392; the yen weakened to 158.09 per dollar
Cryptocurrencies: Bitcoin traded at $101,744.89, while Ether rose to $3,677.95
Bonds: US 10-year Treasury yield fell two basis points to 4.61%; Japan’s 10-year yield decreased one basis point to 1.125%; Australia’s 10-year yield remained flat at 4.47%
Commodities: West Texas Intermediate crude dropped 0.1% to $73.45 per barrel; spot gold remained steady
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