Asia-Pacific markets largely trended downward on Friday as investors digested a mix of economic data, including Tokyo’s accelerating inflation and a rebound in South Korea’s industrial production.
The region’s benchmarks faced pressure amid uncertainty surrounding global monetary policy, despite pockets of resilience in select markets.
Tokyo’s November inflation figures showed the headline rate rising to 2.6%, a significant uptick from October’s 1.8%.
Core inflation, which excludes volatile fresh food prices, came in at 2.2%, slightly above the 2.1% predicted by economists in a Reuters poll.
Tokyo’s inflation data, often seen as a bellwether for nationwide trends, suggests mounting price pressures in Japan, which could bolster the case for a potential rate hike by the Bank of Japan at its December meeting.
Meanwhile, South Korea’s industrial production rebounded with a 2.3% year-on-year increase in October, reversing a 1.3% contraction in September.
Despite the positive data, South Korea’s benchmark Kospi fell by 1.74%, while the small-cap-focused Kosdaq dropped 1.75%.
The divergence underscores lingering market concerns over global demand and economic uncertainty.
In Japan, the Nikkei 225 slid 0.59%, and the broader Topix fell 0.35% as investors weighed the inflation data. Australia’s S&P/ASX 200 mirrored the regional downturn, shedding 0.35%.
In contrast, Hong Kong’s Hang Seng Index defied the trend with a modest 0.21% gain, buoyed by a recovery in tech stocks.
Mainland China’s CSI 300, however, was slightly down in early trade.
Dollar weakens amid rate cut speculation
The US dollar fell 1.4% against major currencies this week as traders increasingly anticipated a December rate cut by the Federal Reserve.
Futures markets now assign a 63% probability to a quarter-point cut, up from 55% the previous week, according to CME Group’s FedWatch Tool.
The yen appreciated to a five-week high, trading below 150 against the greenback, supported by Tokyo’s inflation surge and heightened speculation of tighter monetary policy from the Bank of Japan.
Oil prices steady, gold Falls
Oil prices steadied on Friday following news of an Israel-Hezbollah ceasefire, but they remained poised for weekly losses.
US West Texas Intermediate crude futures edged up 0.1% to $68.76 per barrel, down 2.5% for the week.
Gold, meanwhile, was down 2.7% this week, trading at $2,638.29 per ounce as the dollar weakened.
India’s economic growth slows
India’s economy is expected to post its slowest quarterly growth since March 2023, with economists forecasting a 6.5% expansion in the second fiscal quarter.
The estimate falls below the Reserve Bank of India’s earlier forecast of 7% and represents a slight slowdown from the 6.7% growth recorded in the first quarter.
Agriculture, which accounts for over 18% of India’s GDP, is projected to perform strongly, supported by sustained consumer spending and improved business confidence, according to the RBI’s October outlook.
Focus on Europe and monetary policy
European bond markets provided some respite, with French bond yields easing after Prime Minister Michel Barnier scrapped plans to raise electricity taxes in the 2025 budget.
Meanwhile, German inflation undershot forecasts, signaling potential downside risk for the eurozone’s inflation reading.
Traders remain focused on the European Central Bank, with expectations leaning toward a gradual rate-cut approach in December.
The mixed signals from Asia, Europe, and the US leave investors closely watching key economic indicators and central bank decisions in the weeks ahead, as markets continue to navigate a complex global environment.
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