Investing.com — Asian stocks fell sharply on Monday, led by losses in Australian and Hong Kong shares, as investors reassessed the possibility of a U.S. interest rate cut following the release of stronger-than-expected payrolls data last week.
Stock markets in Japan were closed for the holiday, which contributed to the decline in trading volumes.
US stock index futures were largely flat in Asian trading, as investors awaited crucial inflation data due later this week.
Asian stocks are under pressure as markets lower expectations of interest rate cuts from the Federal Reserve
The Hong Kong index fell by xx%, while Chinese stocks fell and indexes fell on Monday.
Chinese trade data failed to provide any support to equity markets, despite growing more than expected in December.
Australia's index fell by 1.4%. Insignia Financial Ltd (ASX:) shares rose almost 3% to hit a three-year high on Monday after receiving an improved takeover offer from Bain Capital.
Data on Friday showed an unexpected rise in December, and the unemployment rate fell, signaling a strong end to 2024 for the labor market. This supports expectations that the Fed will leave interest rates steady this month.
The Fed cut interest rates by 100 basis points in 2024 but signaled smaller-than-expected cuts in 2025 in the face of flat inflation and a resilient economy.
“Another bullish surprise on US jobs numbers will reinforce the belief that Fed officials are not under pressure to cut interest rates in the near term. We will get record jobs revisions next month, which could change the story, but in a near-term environment,” ING analysts said in a recent note. “From sticky inflation, risks are increasingly tilted toward an extended Fed pause.”
Goldman Sachs now expects the Fed to cut interest rates twice this year, a revision from its previous forecast of three rate cuts.
Elsewhere in Asia, the Philippines index fell more than 1%, while the Singapore index lost 0.3%.
India indicated a sharp decline at the open.
South Korea's index fell by 1% amid ongoing political unrest in the country. South Korean investigative authorities are trying to arrest deposed President Yoon Suk-yeol for trying to impose martial law.
A barrage of data is available this week
Globally, the focus will be squarely on key US data releases this week including the December Producer Price Index (PPI) on Tuesday, Wednesday, Thursday and Friday.
China is also scheduled to release several key economic indicators that will provide insight into its economic performance at the end of 2024. The country's full-year 2024 figures are due for release on Friday. In addition, data for December is also scheduled to be released on Friday.
In Australia, December is due on Thursday.
