Written by Ankur Banerjee
SINGAPORE (Reuters) – Asian stocks rose on Friday, aiming to shake off a lackluster start to 2025, while the dollar held near a two-year high against a basket of currencies as investors worried U.S. interest rates could stay high for longer.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.38%, with South Korean stocks leading the way.
However, the index, which rose about 8% in 2024, is on track to decline about 1% during the week. Japan markets are closed for this week.
Chinese stocks struggled to rebound on Friday after falling on Thursday, highlighting growing concerns about the Chinese economy and a potential trade war when Donald Trump begins his US presidency later this month.
China's CSI 300 index fell 0.21%, on track for its biggest weekly decline in almost a year. The Hong Kong index rose by 0.58%.
Long-term Chinese yields fell further, with 10-year and 30-year government bond yields falling by about 3 basis points to touch new highs. (CNY/)
“It was a tough period for stocks at the turn of the year, but strange things can happen in illiquid markets,” said Ben Bennett, Asia Pacific investment strategist at Legal and General Investment Management.
“I don't think we should extrapolate this performance. However, a stronger dollar and higher bond yields will weigh on sentiment going forward and equity investors are hopeful this will change soon.”
European stock markets braced for a weak open, with Eurostoxx 50 futures down 0.14%, and German futures little changed.
On Wall Street, US stocks closed broadly lower on Thursday after initial gains failed to hold. Tesla (NASDAQ:) shares fell 6.1% after reporting the first yearly decline in deliveries.
This gloomy mood comes on the heels of a faltering end to 2024, dampening a year-long rally fueled by growth expectations surrounding artificial intelligence, expected interest rate cuts from the Federal Reserve and, most recently, the prospect of deregulatory policies by the incoming Trump administration. . .
But as the Fed rattled markets last month by forecasting smaller interest rate cuts than previously expected and fears grew that Trump's policies might be inflationary, bond yields rose, boosting the dollar and hurting stocks.
Vasu Menon, managing director of investment strategy at OCBC, said Trump's pro-growth and pro-business agenda may boost the US economy but for the rest of the world, that could be difficult due to potential tariffs and a stronger dollar.
He added, “Therefore, there is a degree of caution and anticipation in the markets, especially after the strong investment performance over the past two years.”
Dollar dominance
The number of Americans filing new claims for unemployment benefits fell to an eight-month low of 211,000 last week, overnight data showed, suggesting fewer layoffs at the end of 2024 and consistent with a healthy labor market.
This bodes well for the US economy, as employment and inflation data later this month will likely be the focus of investors' attention as they gauge how likely the Fed's approach to lowering interest rates will be.
Traders expect an easing of 44 basis points this year, less than the 50 basis points the US central bank expected in December.
That left the index, which measures the greenback against six other units, at 109.14, just below the two-year high of 109.54 it touched on Thursday. The index rose 7% in 2024 as traders adjusted their interest rate expectations.
The euro was among the biggest losers against the rising dollar, after it fell 0.86 percent in the previous session to its lowest level in more than two years at $1.022475. The currency was at $1.0271 on Friday, heading towards a weekly decline of 1.6%, the worst since November. (FRX/)
The yen rose slightly to 157.295 yen to the dollar, but it was not far from the lowest level in more than five months at 158.09 recorded in December. The yen fell more than 10% last year, the fourth straight year of losses.
In commodities, oil prices rose due to optimism about the Chinese economy and fuel demand after President Xi Jinping pledged to boost growth.
Futures rose 0.16% to $76.05 per barrel, while US West Texas Intermediate crude rose 0.18% to $73.25 per barrel.
Gold settled at $2,656 per ounce, after rising 27 percent in 2024, its strongest annual performance since 2010.
