Asian markets off to a slow start
The Asian session is off to a slow start, with the Nikkei up 0.19%, the ASX down 0.29%, and the KOSPI down 1.37% at the time of writing. Strength on Wall Street to end last week has not been broad-based, with only four sectors closing in the green, but that did not stop the Nasdaq and S&P 500 from edging to yet another record high.
The heavy lifting was concentrated around a handful of tech stocks, notably with Tesla and Broadcom up 5.3%, while Amazon and Meta were up 2.9% and 2.4% respectively. However, the struggle for value sectors to see any notable gains may leave Asian indices on a more subdued note.
US non-farm payrolls provide mixed signals
The key highlight to digest was the US November non-farm payrolls, which seems to offer something for everyone. A surprise upside in US job additions, along with upward revisions to previous readings, will validate the resilience in the US labour market. US wage growth was higher than expected as well, with a 0.4% increase month-on-month, which should continue to offer a healthy consumer backdrop for a potential soft landing.
The US unemployment rate was slightly higher at 4.2%, which is not too overblown to trigger recession fears, while an edge closer towards the Federal Reserve (Fed)’s year-end projection of 4.4% should give policymakers some reassurance in following through with a 25-basis point (bp) cut this month. The increased certainty around further Fed easing ahead should keep risk sentiments well-supported, and we may expect somewhat of a drift higher in the lead-up to the Fed meeting next week.
China’s inflation data on watch ahead
Today, all eyes will be on China’s inflation data. November consumer prices are expected to tick up slightly to 0.4% from 0.3% previously, while producer prices are projected to improve marginally to -2.8% from -2.9%. These readings may signal some near-term stabilisation, potentially reflecting modest success from recent economic stimulus measures. However, the still-subdued pace of price recovery may continue to underscore weak domestic demand, with households and businesses remaining cautious against an uneven economic backdrop. Concerns around deflation risks are unlikely to dissipate without more substantial progress.
Chinese equities did see some signs of life last week, with a Friday rally bringing the Hang Seng Index (HSI) to end the week up 2.3%. There is likely some optimism mounting around the upcoming annual Central Economic Work Conference this week, which will be on watch to offer more clarity on how policymakers may tackle the economic challenges into next year.
Focus will be on any ramp-up in tone around upcoming policy measures and more clarity over the scale or areas of any fresh economic injections. Sticking to its usual vague script and having little new clarity on any concrete measures ahead may be a source of market disappointment, which could potentially see some gains in Chinese equities unwind.
