Asia Kicks Off New Year After Ominous End To 2024: Markets Wrap

As Asia begins the New Year, markets are set to open with a cautious outlook following a troubling end to an otherwise strong year for global equity investors in 2024.

Market Movements and Predictions

In Sydney, stock values remained largely unchanged, while futures indicated a slight rise for Hong Kong’s benchmark index. Notably, futures for Shanghai benchmarks showed a decline after mainland Chinese stocks ended December on a negative note. Additionally, both the S&P 500 and Nasdaq 100 indices experienced their fourth consecutive day of losses in a year-end pullback, resulting in over a trillion dollars being wiped from large-cap market values.

In Japan, the markets will remain closed until January 6, and New Zealand is on holiday during this period. South Korean markets are anticipated to open late. Meanwhile, US equity futures showed a slight decrease.

The Currency and Commodities Overview

The Japanese yen weakened significantly, trading at around 157 per dollar, marking its third consecutive day of value loss against the dollar, reflecting a robust performance by the greenback. The Bloomberg Dollar Spot Index recorded its best year in nearly a decade.

Oil prices remained stable as the New Year opened, spurred by a report indicating decreasing US crude inventories. Moreover, there was a notable halt in the flow of Russian gas to Europe via Ukraine, a route that has been active for fifty years. This halt was confirmed by both Russia and Ukraine following the expiration of a critical transit agreement.

Key Economic Developments and Corporate Actions

In other major economic news, a broad measure of Treasuries achieved a modest annual gain in 2024, despite being less than what was seen in 2023. However, trading of Treasuries in Asia was halted due to the holiday in Japan.

During the New Year break, Nippon Steel Corp. made a proposal to give the US government veto power over any possible cuts to US Steel Corp.’s production capacity in a final attempt to obtain approval for its acquisition of the American company. Following this news, shares of US Steel surged, marking the largest increase in a year.

In the Chinese market, Alibaba Group Holding Ltd. decided to sell its stake in Sun Art Retail Group Ltd. to private equity firm DCP Capital, aiming to focus more on its core online ventures. Meanwhile, BYD Co. reported a substantial annual sales increase, selling 4.25 million passenger cars last year.

Economic Growth Projections

President Xi Jinping highlighted expectations of approximately 5% growth for China’s economy in 2024. In December, the Chinese central bank increased liquidity support by injecting 1.7 trillion yuan (about $233 billion) into the economy and financial markets.

In Singapore, Prime Minister Lawrence Wong reported that the economy performed better than anticipated in 2024, with GDP growth of 4%, exceeding previous forecasts of 3.5%.

Conversely, South Korea faced ongoing political challenges, as Acting President Choi Sang-mok resisted calls for a mass resignation from his advisers.

Housing Market and Investment Trends

The latest data indicated a downturn in Australian house prices for the first time in 22 months as buyers found it increasingly difficult to enter the market. Concurrently, the supply of properties available has risen.

Abu Dhabi’s Mubadala Investment Co. emerged as the most active sovereign wealth fund in 2024, escalating its deal-making across various sectors, including private credit and artificial intelligence. Meanwhile, Saudi Arabia’s Public Investment Fund, previously the most active in 2023, has reduced its spending and shifted focus towards domestic investments.

Performance of Stocks and Major Indices

In 2024, stocks, especially those in the US technology sector, significantly outperformed other asset classes. The S&P 500 rose by 23%, marking its fifth gain in six years and adding a substantial $10 trillion to US equity values. Similarly, the MSCI All-Country World Index climbed by 16%.

As the US economy continues to advance, investors are entering 2025 with a range of challenges, particularly concerning inflation and the Federal Reserve's policies in response, especially after Chair Jerome Powell suggested fewer interest-rate cuts going forward. There's ongoing speculation about how the pro-growth policies of President-elect Donald Trump could influence consumer prices and federal fiscal health.

Key Economic Events and Market Overview

Looking ahead, there are key economic indicators to watch this week:

• US construction spending, jobless claims, manufacturing PMI (Thursday)
• US ISM manufacturing and light vehicle sales (Friday)

As of this morning in Tokyo, some significant market movements include:

Stocks

• S&P 500 futures dipped by 0.1%
• Hang Seng futures increased by 0.3%
• Australia’s S&P/ASX 200 remained unchanged

Currencies

• The Bloomberg Dollar Spot Index displayed little movement
• The euro was steady at $1.0351
• The Japanese yen dropped by 0.3% to 157.69 per dollar
• The offshore yuan remained stable at 7.3344 per dollar

Cryptocurrencies

• Bitcoin decreased by 0.5% to $94,329.7
• Ether declined by 0.4% to $3,349.42

Bonds

• The yield on 10-year Treasuries was relatively unchanged at 4.57%
• Japan’s 10-year yield fell two basis points to 1.090%
• Australia’s 10-year yield increased by six basis points to 4.42%

Commodities

• West Texas Intermediate crude climbed by 0.4% to $71.98 a barrel
• Spot gold prices remained mostly unchanged

This overview encapsulates the cautious yet hopeful start to the New Year for Asian markets as they navigate the lingering uncertainties and challenges.

Asia, Markets, Stocks