Asian markets opened the week on a cautious note, as stronger-than-expected US payroll data dampened hopes for early Federal Reserve rate cuts.

The robust labour market report pushed bond yields higher, raising concerns over equity valuations and adding pressure to regional indices.

Hong Kong, China markets take a hit

Hong Kong’s Hang Seng Index dropped 1.6%, falling below the 19,000 mark for the first time since September 2024, weighed down by persistent concerns over China’s economic outlook.

With this, Hang Seng extended its losing streak to the sixth straight session. The index traded 1.29% lower at 18,817.98.

Mainland China’s CSI 300 declined 0.25%, extending losses after closing at its lowest level since September 2024 last week.

Kospi slips below 2,500

In South Korea, the Kospi fell close to 1%, while the Kosdaq slipped 0.53%, as political uncertainty looms ahead of the Constitutional Court hearing on President Yoon Suk Yeol’s impeachment.

Foreign investors recorded net sales of 353.6 billion won, while institutions sold 168.9 billion won worth of stocks.

In contrast, individual investors were net buyers, accumulating 481.9 billion won in stocks, attempting to counterbalance the sell-off.

Declines were observed among most top-cap stocks in the securities market.

Samsung Electronics slid 1.81% compared to the previous session, while SK Hynix and Hyundai Motor faced sharper declines of 3.98% and 3.10%, respectively, contributing significantly to the broader market’s downturn.

Other regional markets

Australia’s S&P/ASX 200 declined 1.17%, reflecting the broader regional sell-off.

Japanese markets were closed for a public holiday, contributing to thinner-than-usual trading volumes.

The MSCI Asia-Pacific index outside Japan edged down 0.4%, highlighting the overall bearish sentiment in the region.

Wall Street cracks on Friday

US stocks tumbled on Friday, as stronger-than-expected non-farm payroll data fueled concerns that the Federal Reserve might maintain current interest rates or slow the pace of rate reductions.

The major averages ended the session sharply lower.

The Dow dropped 696.75 points, or 1.63%, to close at 41,938.45.

The S&P 500 fell 91.21 points, or 1.54%, settling at 5,827.04, while the Nasdaq lost 317.25 points, or 1.63%, to end at 19,161.62.

Labor Department data revealed that US non-farm payroll employment surged by 256,000 in December, significantly surpassing economists’ expectations of a 155,000 increase.

November’s job gains were revised downward to 212,000 from the initially reported 227,000.

The unemployment rate edged down to 4.1% in December, compared to 4.2% in November, defying expectations for the rate to remain unchanged.

The robust labor market data added to concerns about the Fed’s monetary policy trajectory, weighing on investor sentiment.

Investors are bracing for a critical US CPI report on Wednesday, which could further shape Federal Reserve policy.

Any upside surprise in core inflation beyond the forecasted 0.2% could solidify a “higher-for-longer” stance on interest rates, exacerbating pressure on global markets.

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Singapore’s gambling regulator has blocked access to Polymarket, a controversial crypto predictions platform, marking another hurdle for the platform amid increasing regulatory scrutiny.

The Gambling Regulatory Authority (GRA) of Singapore has flagged Polymarket as an “illegal gambling site” operated by an unlicensed provider.

Users in Singapore now face a warning message when attempting to access the platform, which has been particularly scrutinised for its handling of US election-related betting.

Reports of the block began circulating on Sunday evening, with Alex Zuo, vice president of investments and custody for Cobo, sharing a screenshot of an official notice.

The notice cites Section 20 of Singapore’s Gambling Control Act 2022, warning users that engaging with unlicensed gambling services could result in fines or imprisonment.

While the GRA has not issued an official statement, the platform remains inaccessible to Singaporean users at the time of writing.

In Singapore, users are required to use Singapore Pools, the state-owned lottery subsidiary, for legal online gambling.

This new restriction comes as part of a broader crackdown on unlicensed online gambling, which has seen the shutdown of over 3,800 websites and the blocking of $37 million in transactions as of the end of 2024.

Polymarket’s troubles across the globe

Polymarket has encountered regulatory challenges not only in Singapore but also in several other countries, including France and the United States.

In France, the National Gaming Authority (ANJ) initiated an investigation into Polymarket’s operations after a French user placed large bets on the 2024 US presidential election.

French laws are stringent when it comes to online gambling, allowing only certain activities like sports betting and poker. As a result, the investigation centers around potential violations of these regulations.

In the US, Polymarket has faced even more intense scrutiny.

The Commodity Futures Trading Commission (CFTC) issued a subpoena to Coinbase, requesting information about user interactions with Polymarket.

This follows a previous $1.4 million fine imposed on Polymarket for allegedly offering unregistered prediction markets. As part of the settlement, Polymarket agreed to cease operations for US users.

Despite this settlement, the US Department of Justice has launched its own investigation into the platform, with allegations that Polymarket may have continued to accept trades from US users in violation of the agreement.

Additionally, the FBI has conducted a search of devices owned by CEO Shayne Coplan as part of this ongoing investigation.

Despite the regulatory challenges, Polymarket’s user base continues to grow, with the platform recording over 300,00 monthly active users in December 2024.

This growth comes amid its increasingly complicated regulatory environment, including a high-profile FBI raid and an ongoing subpoena issued by the US Commodity Futures Trading Commission (CFTC).

Polymarket’s fresh controversy

Polymarket has come under fresh controversy for allowing users to place bets on the outcome of the deadly Los Angeles wildfires.

One of the markets on the platform focused on how many acres the Palisades fire would burn by a specific deadline, drawing significant attention.

The market had already accumulated more than $270,000 in trading volume after launching last week.

Bettors were heavily focused on a more than 90% probability that the fire would burn between 20,000 and 25,000 acres.

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The Indian Rupee (INR) plunged to an all-time low of 86.2050 against the US dollar on Monday, breaching the 86 mark for the first time in its history.

The depreciation comes after robust US jobs data reignited expectations that the Federal Reserve would limit rate cuts in 2025, putting additional pressure on emerging market currencies.

Compared to Friday’s close at 85.9650, the decline reflects continued challenges for the rupee in the face of a strengthening dollar.

Heavy outflows from domestic equities, hawkish comments from the Federal Reserve, and rising crude oil prices could pressure the INR, given India’s position as the world’s third-largest oil consumer.

However, routine interventions by the Reserve Bank of India (RBI), including the sale of US dollars, may have helped cushion the INR’s losses.

US jobs report dampens hopes for Fed rate cuts

The US labour market exceeded expectations in December, adding 256,000 jobs compared to the 160,000 forecast by economists polled by Reuters.

The unemployment rate also unexpectedly fell to 4.1%, signalling resilience in the US economy.

The upbeat data has bolstered the greenback, with the dollar index climbing 0.22% to 109.72, its highest level in over two years.

Federal Reserve officials offered mixed signals on future monetary policy.

Fed Chicago President Austan Goolsbee said on Friday that if conditions are stable and there is no uptick in inflation, with full employment, the interest rates should go down.

Fed St. Louis President Alberto Musalem however said that greater caution is warranted in reducing interest rates, due to the risk that inflation might get stuck between 2.5% and 3% which has increased by the time of last month’s meeting.

How much further can the rupee depreciate?

Gavekal Research has raised the possibility of the rupee weakening further, potentially breaching the 90 mark against the US dollar in 2025.

The research notes that India may move away from its quasi-peg to the dollar, allowing the currency more flexibility but also exposing it to heightened volatility.

A bigger depreciation of around 10%, taking the rupee to 95 is “not out of the question,” analysts Udith Sikand and Tom Miller wrote in a note.

Currency traders are watching closely, with some highlighting that bearish bets on the rupee are likely to persist following the US labour market report.

“We may be nearing levels where the negatives for the rupee are priced in, but a correction is overdue,” a trader remarked.

Dhananjay Sinha, co-head of equities and head of research- strategy and economics at Systematix Group said that their global models suggest that robust US nominal GDP growth of 4.6% in 2025, higher-for-longer interest rates leading to a 10-year US Treasury yield of 4.0% (down from the current 4.6%), and a 2-month Treasury yield minus 5-year breakeven inflation of 1.9% could drive a stronger USD against both the Emerging Market (EM) Dollar Index and INR/USD.

This scenario implies a potential 5% depreciation in the EM currency index and a 7-10% decline in the INR.

Domestically, weak growth trends project a 4% trend depreciation for INR, with a peak decline of 9%.

At a current YoY depreciation rate of 3%, the INR remains in the lower band, signalling potential for sharper weakening.

Additionally, the negative India-US real policy rate spread (-1.7% in November 2024) and the overvalued broad real effective exchange rate (REER) add pressure. He said,

Considering all factors our estimates suggest that INR/USD can depreciate by 7-10% from the recent pegged levels of 84 to 90-92 in the coming 6-10 months.

Technical outlook: USD/INR signals caution

The USD/INR pair continues its upward trajectory, trading above its 100-day Exponential Moving Average (EMA).

However, the 14-day Relative Strength Index (RSI) has entered overbought territory, suggesting possible consolidation.

Resistance is seen at 86.15, with further gains toward 86.50 if momentum sustains.

Support levels are positioned at 85.85 and 85.65, with the psychological 85 mark providing a key floor.

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Los Angeles is grappling with one of its worst wildfire crises, as four devastating blazes continue to burn across the county, leaving 24 dead and over 150,000 displaced.

While efforts to contain the fires have ramped up, the state’s preparedness and infrastructure are facing intense scrutiny.

Critics, including US President-elect Donald Trump, have highlighted shortcomings in California’s fire response systems, citing inadequate resource management and budget cuts as key failings.

The fires, spread over an area larger than San Francisco, have exposed vulnerabilities in firefighting infrastructure, including water shortages and insufficient personnel.

With dangerous Santa Ana winds forecast to worsen through midweek, concerns are mounting over the state’s ability to mitigate further destruction.

Structural weaknesses fuelling California’s fire disaster

California’s wildfire crisis is not just a natural disaster; it also represents a systemic failure in resource allocation and planning.

The Palisades and Eaton fires, responsible for most of the destruction, have consumed over 40,000 acres and destroyed 12,300 structures, including luxury homes and critical infrastructure.

Despite deploying over 14,000 firefighters from across the US, Mexico, and Canada, containment remains challenging due to erratic wind patterns and dry vegetation.

Water shortages have exacerbated the crisis. Reports reveal that key reservoirs were offline during the fires’ initial outbreak, leading to dry hydrants in neighbourhoods like Pacific Palisades.

This issue has reignited debates about the state’s water management policies.

Governor Gavin Newsom has launched an inquiry into these failings while implementing emergency measures to accelerate disaster relief and prevent price gouging targeting displaced residents.

Impact of LA wildfires

The fires have ignited political tensions, with President-elect Trump sharply criticising California officials.

Using his Truth Social platform, Trump lambasted the state’s Democratic leadership for what he termed “incompetence,” accusing them of mismanaging resources and neglecting fire prevention measures.

Governor Newsom, in turn, dismissed Trump’s remarks as misinformation, calling for a focus on practical solutions rather than political blame games.

The environmental consequences of these wildfires are staggering. Toxic ash laden with asbestos, arsenic, and other hazardous materials poses long-term health risks for residents.

Along with this, the destruction of ecosystems and carbon emissions from the fires have intensified concerns about climate change and its role in fuelling extreme weather events.

The Palisades Fire, which has affected affluent areas like Malibu and Brentwood, underscores the socioeconomic disparities in disaster preparedness.

While some communities benefit from robust insurance coverage and access to emergency services, others face significant barriers to recovery, highlighting the need for equitable policy interventions.

Containment challenges and recovery efforts

Efforts to control the fires remain precarious, with containment rates for the Palisades and Eaton fires at just 11% and 27%, respectively.

Fire crews continue to battle shifting winds and dry conditions, deploying aerial resources to drop water and retardant on critical zones.

The threat of rekindling and new ignitions remains high, as forecasters predict wind gusts of up to 113 km/h through Wednesday.

Evacuation orders remain in place across Los Angeles County, including iconic sites like the Getty Center and upscale neighbourhoods in Brentwood.

Officials have warned residents against returning to fire-affected areas due to hazardous conditions, including unstable structures and toxic debris.

As investigations into the fires’ causes continue, preliminary evidence suggests a possible connection to a smaller blaze that erupted days earlier.

Experts caution that such rekindling events highlight the need for improved surveillance and fire prevention strategies.

Despite the grim outlook, there are glimmers of hope. The Kenneth Fire, one of the smaller blazes, has been fully contained, allowing more resources to be allocated to the larger fires.

With the death toll climbing and tens of thousands of lives disrupted, the road to recovery for Los Angeles is fraught with challenges.

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