Asian shares had a subdued start to the week on Monday, with high Treasury yields challenging rich Wall Street equity valuations and supporting the U.S. dollar near multi-month highs. Trading volumes were light due to the New Year holiday approaching and a lack of significant data releases this week. China is set to release PMI factory surveys on Tuesday, while the U.S. ISM survey for December is scheduled for Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan saw a slight dip of 0.2%, yet remains up 16% for the year. Japan’s Nikkei declined by 0.9%, but has gained around 20% in 2024. South Korea’s main index hasn’t been as fortunate, facing political uncertainty and carrying losses of 9% for the year, despite a 0.3% increase most recently.
The South Korean budget carrier Jeju Air saw its shares hit record lows following a tragic plane crash that claimed 179 lives. Chinese blue chips rose by 0.3%, marking nearly a 16% gain for the year, mostly achieved in just two weeks in September after Beijing pledged additional stimulus.
European markets saw slight movements in futures, with EUROSTOXX 50 up 0.1%, while FTSE and DAX futures remained steady. S&P 500 and Nasdaq futures both dropped by 0.1%, following a broad-based sell-off on Wall Street on Friday, despite no clear trigger.
While the S&P 500 and Nasdaq have surged by 25% and 31%, respectively, this year, lofty valuations compared to the risk-free return of Treasuries are causing concern. Bond yields on 10-year Treasuries near eight-month highs at 4.631% have sparked worries about the potential impact on corporate earnings growth expectations for 2025.
The U.S. dollar has remained strong against major currencies, gaining 6.5% for the year. The euro has depreciated over 5% against the dollar in 2024 to stand at $1.0427. The dollar also held firm against the yen, hovering near a five-month peak at 157.79.
Gold prices have faced pressure due to the strength of the dollar, yet the precious metal is still up by 28% for the year at $2,624 an ounce. Oil prices have struggled amid demand concerns, with Brent rising by 6 cents to $74.23 a barrel, and U.S. crude adding 1 cent to $70.61 per barrel.
