Asian shares start week muted amidst high treasury yields

Asian stock markets began the week cautiously as elevated US Treasury yields presented a challenge to Wall Street’s robust equity valuations and bolstered the US dollar near multi-month peaks.

Trading activity was low this week due to the upcoming New Year holiday and limited economic data releases. China will release its PMI factory surveys on Tuesday, and the US ISM survey for December is scheduled for Friday.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent, though it remains 16 per cent higher for the year. Japan’s Nikkei eased 0.9 per cent, but is still sitting on gains of approximately 20 per cent for 2024.

South Korea’s main index has been affected by political uncertainty, resulting in a nine per cent loss for the year. It was last up 0.3 per cent. Shares of South Korean budget carrier Jeju Air hit a record low on Monday after a plane crash that claimed 179 lives.

Chinese blue chips added 0.3 per cent, bringing their year-to-date gain to almost 16 per cent, with the majority of this increase occurring within two weeks in September after Beijing announced further stimulus measures.

The yield on 10-year Treasuries is near eight-month highs at 4.631 per cent, ending the year around 75 basis points above its starting point, despite the Federal Reserve implementing 100 basis points of cuts to cash rates.

The US dollar has benefited from widening interest rate differentials, gaining 6.5 per cent against a basket of major currencies this year.

The euro has weakened by more than five per cent against the dollar in 2024, last trading at $1.0427, close to its recent two-year low of $1.0344. The dollar held near a five-month high against the yen at 157.79.

Despite the dollar’s strength, gold has still risen 28 per cent for the year so far at $2,624 an ounce.

Oil has faced challenges due to concerns about demand, especially from China, which has kept prices in check and led OPEC+ to extend its production cuts repeatedly. Brent crude rose 6 cents to $74.23 a barrel, while US crude added 1 cent to $70.61 per barrel.

Attribution: Reuters

Subediting: Y.Yasser