By Wayne Cole
SYDNEY (Reuters) – Asian stocks got off to a weak start to the week on Monday as rising Treasury yields challenged rich Wall Street equity valuations while supporting the U.S. dollar near multi-month highs.
Trading volumes were light heading into the New Year holiday and somewhat bare data notes this week. China's factory PMI surveys are due on Tuesday, while the US December ISM survey is due on Friday.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%, but is still 16% higher for the year. It fell by 0.9%, but stabilizes with gains of about 20% for the year 2024.
South Korea's benchmark index has not been so lucky, facing a storm of political uncertainty in recent weeks, and is saddled with losses of 9% for the year. The latest rise was 0.3%.
Shares of South Korean airline Jeju Air hit an all-time low on Monday, following a plane crash that killed 179 people.
Shares of major Chinese companies rose 0.3%, rising nearly 16% year-on-year, and almost all of those gains came in just two weeks in September after Beijing promised more stimulus.
EUROSTOXX 50 futures rose 0.1%, while little changed.
Nasdaq futures fell 0.1%. Wall Street suffered a broad sell-off on Friday for no apparent reason, even though trading volumes were just two-thirds of the daily average. (.n)
The NASDAQ is up 25% for the year and the NASDAQ is up 31%, which increases valuations when compared to the risk-free yield of Treasuries. Investors are counting on earnings per share growth of just over 10% in 2025, versus an expected rise of 12.47% in 2024, according to LSEG data.
However, yields on 10-year Treasury notes are near an eight-month high of 4.631%, ending the year about 75 basis points above where they started, despite the Fed cutting interest rates by 100 basis points.
“The continued rise in bond yields, driven by a reassessment of less restrictive monetary policy expectations, raises some concerns,” said Quasar Elizondia, research strategist at brokerage Pepperstone.
“The possibility that the Fed will keep monetary policy tight for longer than expected could dampen corporate earnings growth expectations for 2025, which in turn could influence investment decisions.”
Bond investors may also be wary of rising supply, as President-elect Donald Trump has promised tax cuts with few concrete proposals to rein in the budget deficit.
Trump is expected to issue at least 25 executive orders when he takes office on January 20, covering a range of issues from immigration to energy policy and cryptocurrencies.
Widening interest rate spreads have kept the US dollar in demand, giving it a 6.5% gain for the year on a basket of major currencies.
The euro has lost more than 5% against the dollar so far in 2024 to reach $1.0427, not far from its recent two-year low of $1.0344.
The dollar held near a five-month high against the yen at 157.79 yen, with only the risk of Japanese intervention preventing another test of the 160.00 barrier.
The strength of the dollar has been a drag on gold prices, although the metal is still 28% higher on the year so far at $2,624 an ounce. (Ghoul/)
Oil has had a more difficult year as concerns about demand, especially from China, capped prices and forced OPEC+ to repeatedly extend an agreement to limit supplies. (or)
It rose 6 cents to $74.23 per barrel, while adding one cent to $70.61 per barrel.
