Asian stock markets saw a subdued performance on Thursday, with investors remaining cautious ahead of the US Thanksgiving holiday.
The dollar held steady as concerns over the US economy and inflation outlook weighed on sentiment, leaving traders hesitant to make significant moves before the holiday break.
The MSCI Asia-Pacific Index, excluding Japan, was down by 0.07%, reflecting a cautious mood across the region. In Japan, the Nikkei index fared better, rising 0.46%, as investors digested mixed economic signals. The overall sentiment remained fragile as traders weighed the potential implications of US policy and the global economic outlook.
US data released on Wednesday showed that while consumer spending rose slightly more than expected in October, progress in reducing inflation had stalled. This development has raised questions about the Federal Reserve’s next steps, especially with inflation remaining above the central bank’s 2% target. Despite this, the US economy has shown resilience, keeping expectations for future interest rate cuts in play, though the pace of these cuts remains uncertain.
The US Federal Reserve is still widely expected to implement a 25 basis point rate cut in December, but ongoing concerns about inflation could limit the scope for further reductions. Economists, including Kristina Clifton at the Commonwealth Bank of Australia, have noted that solid inflation data for November could challenge the Fed’s current outlook.
Further complicating the picture is the possibility of new tariffs under the incoming US administration. While previous tariffs did not significantly fuel inflation, analysts are cautious about the potential impact of new trade policies, particularly on core goods. The uncertainty surrounding this issue has contributed to a clouded inflation outlook, which could limit market expectations for additional rate cuts.
In South Korea, a surprise interest rate cut by the central bank added another layer of complexity to the economic landscape. The country’s economy has shown signs of stagnation, and inflation has slowed more than anticipated. Following the rate cut, the South Korean won weakened, reflecting investor concern over the economic outlook.
Meanwhile, the yen held near a one-month high, although it dipped 0.3% to 151.615 per dollar. The yen’s recent strength is tied to expectations that the Bank of Japan may hike rates next month, contributing to the currency’s stronger weekly performance since September.
In commodities, oil prices remained steady, with Brent crude trading at $72.80 per barrel and US West Texas Intermediate at $68.70. The stability in oil prices was partly driven by a ceasefire deal between Israel and Hezbollah, easing concerns over supply disruptions.
European markets showed a more positive tone, rebounding from earlier losses. The pan-European STOXX 600 index rose by 0.6%, led by gains in technology stocks. Notably, companies like ASML, ASM International, and BE Semiconductor saw share prices climb following reports that US sanctions on China’s semiconductor industry might not be as severe as initially feared.
With input from Reuters, CNBC, and US News & World Report.
