Stocks in Asia fell after the US market also dipped, mainly due to concerns about rising interest rates from the Federal Reserve. People are worried the Fed won’t lower rates until later, as inflation continues to be a problem.
In countries like Australia and Japan, the markets started lower. A big selloff in US technology stocks, like Nvidia, which dropped over 6%, made investors uneasy. The S&P 500, a key US stock index, fell more than 1% after a report showed that prices for services hit their highest level in a long time.
US Treasury bonds showed little change after a decrease in their values previously. There was a big sale of 10-year bonds that had the highest yield since 2007. Kenny Polcari from SlateStone Wealth mentioned that rising bond yields shouldn’t hurt stocks—unless the economy starts to struggle. However, inflation could become a problem.
Just a month ago, traders expected the Fed to cut rates by March, but now they think it won’t happen until the second half of the year. A separate report showed job openings increased in November, mainly in business services, while other areas had mixed demand for workers.
Mark Streiber from FHN Financial noted that the latest services report aligns with the Fed’s message about being careful with rate cuts. Atlanta Fed President Raphael Bostic emphasized that officials need to remain cautious because inflation is still uneven.
Bank of America predicts traders might start seeing strong economic data as bad news, as it could mean the Fed keeps rates high for longer. Some traders are even expecting US 10-year yields to rise to 5%, a level not seen since October.
In Asia, investors in China’s large government bond market are feeling pessimistic. Yields on 10-year Chinese government bonds are at all-time lows, creating a huge gap with US bonds, even with the government’s recent economic support measures.
Samsung Electronics had lower earnings than expected because they spent a lot to regain market share in AI chips and smartphones.
In Hong Kong, banks like HSBC and Standard Chartered are holding onto more cash and liquidity, even though the government wants them to help small businesses struggling in the economy. They’ve reached a liquidity coverage ratio of over 180%, which is the highest ever.
Lastly, oil prices went up for the second day, fueled by a report showing US oil inventories are decreasing, while Bitcoin is trading below $100,000.
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