Market Analysis

Wall Street’s Record Pushes Asian Stocks Higher; Yuan and Euro Struggle

Amos Simanungkalit · 03 Dec 2024585.2K Views

Image Credit: AP

Asian stocks rose on Tuesday, driven by a strong performance in the tech sector following record highs on Wall Street the previous day. The dollar hovered near a six-week low against the yen as traders assessed the outlook for interest rates in the U.S. and Japan. Investors also kept an eye on political instability in France, where the government faced a potential collapse, causing the euro to slip to a one-week low. Meanwhile, the Chinese yuan weakened, dropping to a 13-month low due to the growing threat of additional U.S. tariffs on China.

Japan’s tech-heavy Nikkei surged 1.6%, while South Korea’s KOSPI gained 1.7%, and Taiwanese shares rose by 1.1%. Australia’s benchmark stocks reached a fresh all-time high with a 0.7% increase. However, Chinese stocks faced pressure, with Hong Kong's Hang Seng index edging slightly lower and mainland blue chips declining 0.3%. MSCI's broad index of Asia-Pacific shares increased by 0.7%.

U.S. stock futures for the S&P 500 and Nasdaq were flat after the cash indexes hit new record highs, buoyed by strong gains from major tech stocks, including Meta Platforms, which surged nearly 19%, and Tesla, which jumped 12%. Chris Weston, head of research at Pepperstone, noted that the unwinding of equity hedges indicated market confidence in continued gains into the year-end, particularly from the "MAG7" stocks, including Microsoft and Meta.

In currency markets, the dollar rose 0.2% to 149.87 yen but remained near Monday’s low of 149.09 yen, its weakest level since October 21. The dollar received some support from stronger-than-expected U.S. manufacturing data, which showed a slowdown in price increases. However, it came under pressure after Federal Reserve Governor Christopher Waller indicated he was "leaning toward" a rate cut at the Fed’s December meeting. Traders are now pricing in a 75% chance of a 0.25% rate cut this month, up from 66% a day earlier. The two-year U.S. Treasury yield fell to 4.1776%, approaching its four-week low of 4.1550% from last Friday.

The yen remained supported by rising expectations that the Bank of Japan will raise rates by a quarter point in December, with traders estimating the chances at around 58%. Analysts suggest that if USD/JPY stays below the 151/152 resistance zone, there could be a deeper decline toward 145.00, especially if the Fed cuts rates and the BoJ hikes.

The euro eased 0.1% to $1.0488 after a 0.7% drop the previous day, hitting a one-week low. This decline came amid growing concerns over the potential collapse of the French government, with far-right and left-wing parties planning no-confidence motions against Prime Minister Michel Barnier. Meanwhile, sterling remained stable at $1.2654.

The yuan fell to 7.3145 per dollar in offshore trading, marking its lowest level since November last year. Tensions also rose as U.S. President-elect Donald Trump demanded that BRICS nations, including China, refrain from creating or supporting a new currency to challenge the dollar, or face 100% tariffs. Earlier, he had threatened China with additional tariffs on Chinese goods, potentially exceeding 60%.

Gold prices remained steady around $2,635, following a retreat from an all-time high of $2,790.15 on October 1. Oil prices stayed near two-week lows, with Brent crude futures down by 3 cents at $71.80 per barrel and U.S. West Texas Intermediate crude falling by 5 cents to $68.06 per barrel.