December 9, 2024 – Asian equities saw broad declines on Monday as political turmoil in South Korea intensified, while disappointing data from China signaled a sluggish economic recovery. The drop was further compounded by geopolitical concerns, including the collapse of the Syrian government, which added to investor unease.
The regional stock index fell 0.3%, driven by a sharp 2.3% decline in South Korea’s benchmark Kospi index, which extended losses amid ongoing political unrest. South Korean lawmakers, spurred by the brief imposition of martial law last week, pushed for President Yoon Suk Yeol’s resignation, leading to heightened uncertainty in the markets. The smaller-cap Kosdaq Index fared even worse, tumbling over 4%, hitting its lowest point since April 2020. Meanwhile, the South Korean won weakened by approximately 1% against the dollar.
In China, the latest economic data showed a further slowdown in consumer inflation, raising concerns over the country’s slow demand recovery. The figures pointed to the government’s ongoing struggle to stimulate consumption, with expectations rising for additional fiscal support in the coming weeks. China’s central government is preparing for a key policy meeting, the Central Economic Work Conference, scheduled to begin on Wednesday, where further measures to bolster the economy may be announced.
Hong Kong and mainland Chinese stocks followed suit, declining as inflationary pressures eased in the world’s second-largest economy. The news added to the prevailing cautious sentiment among investors in the region.
In contrast, Japanese stocks posted modest gains after the country’s GDP growth was revised upward, signaling more robust economic strength than initially forecast. However, the Japanese yen remained steady amid the mixed economic data.
Geopolitical Tensions and Oil Prices
Geopolitical risks were also on investors’ minds as oil prices climbed following a second consecutive week of losses. The uncertainty surrounding the ousting of Syrian President Bashar al-Assad, who was granted asylum in Russia, added to the volatility in the energy market. Traders are weighing the potential implications of Assad’s fall, particularly on regional oil dynamics, alongside Saudi Arabia’s larger-than-expected cuts to its crude prices for Asia.
Central Bank Decisions and Global Market Outlook
As the week progresses, global financial markets are bracing for a busy period of central bank decisions and key economic data. Investors are closely watching for policy moves from the European Central Bank (ECB), Bank of Canada, Swiss National Bank, and the Reserve Bank of Australia, with many expecting easing measures to support flagging economies. Meanwhile, the Brazilian central bank is likely to raise rates to tackle inflationary pressures.
In the US, markets are pricing in an over 80% chance that the Federal Reserve will implement a rate cut at its December meeting. However, officials have cautioned that further cuts may not come as quickly, and the outlook for future easing remains uncertain.
The US dollar made slight gains against a basket of currencies, while gold rose after China’s central bank resumed expanding its gold reserves in November, ending a six-month hiatus.
As financial markets navigate a week full of uncertainty, investors will be watching closely for any signs of resolution in the political crises in Korea and Syria, as well as developments from major central banks and economic data releases across the globe.
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