Asian stocks rose on Monday, supported by record-high closes on Wall Street, while the dollar rebounded from multi-week lows against the yen and British pound, as the market awaited key developments on the U.S. interest rate outlook.
Chinese stocks received an additional boost from strong data in a private manufacturing survey, which confirmed the positive trends seen in the official manufacturing figures released over the weekend.
Incoming U.S. President Donald Trump further supported the dollar by warning BRICS nations against attempting to replace the greenback with alternative currencies.
“There will be two main drivers of market volatility this month,” said Kyle Rodda, senior financial markets analyst at Capital.com. “The first is the ongoing impact of Trump, particularly regarding future fiscal policies and the growing threat of trade wars. The second is what the U.S. Federal Reserve decides on policy this month. If the Fed implements a rate cut and provides dovish guidance, it could trigger a potential ‘Santa Rally.'”
The euro faced pressure amid concerns over a potential collapse of the French government, with Prime Minister Michel Barnier facing a Monday deadline to offer more budget concessions or risk a no-confidence vote.
As of 0153 GMT, Hong Kong’s Hang Seng index was up 0.9%, while mainland Chinese blue-chip stocks gained 0.6%.
The Caixin/S&P Global manufacturing PMI rose to 51.5 in November from 50.3 the previous month, the highest level since June, surpassing analysts’ expectations of 50.5, according to a Reuters poll. This reading largely mirrored the official survey from Saturday, which also showed modest expansion in manufacturing activity, signaling that the recent wave of stimulus is beginning to have an effect on China’s economy.
Australia’s stock benchmark rose by 0.3%, edging closer to last week’s record high, while South Korea’s KOSPI gained 0.3%.
In contrast, Japan’s Nikkei dropped 0.3%, weighed down by a 3.6% decline in Fast Retailing, the parent company of Uniqlo. However, the broader Topix index rose by 0.4%.
Japanese government bond yields surged to a 16-year high after Bank of Japan Governor Kazuo Ueda stated in a weekend interview that another rate hike is “approaching,” as economic data is progressing as expected. The market is now pricing in a 64% chance of a quarter-point rate increase this month.
The yield on two-year Japanese government bonds jumped 3 basis points to 0.625%, the highest level since November 2008.
However, Ueda also noted that the central bank is closely monitoring developments in the U.S. economy, expressing concerns over uncertainties, including the potential impact of Trump’s proposed tariff hikes.
The dollar index, which tracks the U.S. dollar against six major currencies, increased by 0.2% to 106.23.
The dollar gained 0.5% against the yen, reaching 150.53, recovering from Friday’s low of 149.47 yen, the lowest level since October 21.
The British pound fell 0.4% to $1.2690, after briefly touching $1.2750 on Friday, its highest since November 13.
The euro dropped 0.4% to $1.0530, following a Friday high of $1.0597, the strongest since November 20.
In France, far-right National Rally lawmaker Marine Le Pen warned that Prime Minister Michel Barnier has until Monday to offer additional budget concessions or risk a no-confidence vote that could lead to the collapse of the government.
The outlook for monetary policy also weighed on the euro.
The European Central Bank is expected to cut rates this month, with markets pricing in a 27% chance of a 50 basis point reduction on December 12.
Attention is also on the U.S. Federal Reserve, with Friday’s monthly payrolls report likely to influence the central bank’s decision on whether to implement another rate cut on December 18.
Several Fed officials are scheduled to speak this week, including Fed Chair Jerome Powell on Wednesday. Market participants currently see a 66% probability of a quarter-point rate reduction.
In a holiday-shortened session on Friday, the S&P 500 and Nasdaq gained 0.6% and 0.8%, respectively, reaching all-time highs. S&P 500 futures indicated a slight dip at Monday’s open.
In the cryptocurrency market, ether surged toward Sunday’s nearly six-month high of $3,748, last trading 3.7% higher at $3,726.
Bitcoin rose to $97,863, edging closer to its record high of $99,830 from November 22.
Gold fell 0.7% to $2,635.50, pressured by the strength of the dollar.
Oil prices saw a slight increase, supported by strong Chinese manufacturing data and renewed military action in Lebanon despite a ceasefire.
Brent crude futures rose 11 cents to $71.95 a barrel, while U.S. West Texas Intermediate crude increased 14 cents to $68.14 a barrel.
