Most Asian stocks fell on Monday as U.S. equities ended last week in the red, sparking cautious sentiment among investors. The MSCI Asia Pacific Index snapped its five-day rally, with shares in Australia and Japan sliding while U.S. futures also declined.
Amid thin holiday trading and growing caution about the global economic outlook for 2025, Treasury yields hovered near their highest levels since May, adding to pressure on equities.
Read more: The US Auto Industry in 2025: Key Trends, Challenges, and Opportunities for Major Automakers
Key Factors Driving the Decline
“There’s a little bit of trepidation heading into year-end, owing in part to uncertainty over how the international trade picture may take shape in 2025,” said Tim Waterer, chief market analyst at Kohle Capital Markets Pty.
- Low Trading Volumes: Japanese stock volumes were 17% below their 30-day average, while Australian trading was down 51%, according to Bloomberg data as of 1:23 PM in Singapore. The year-end holiday season has left markets vulnerable to amplified moves.
- Risk-Off Sentiment: With uncertainties around global trade and policy shifts, many traders are trimming positions to avoid potential volatility.
Despite Monday’s pullback, Asian markets are still poised for a strong 2024, with the MSCI Asia Pacific Index up 7.5% year-to-date, buoyed by central banks easing monetary policy and a surge in tech stocks driven by optimism around artificial intelligence.
Breaking News: Jeju Air Crash Shocks Markets
Shares of Jeju Air plunged 16% in Seoul, hitting a record low after a tragic crash on Sunday claimed the lives of all but two of the 181 passengers on board. The stock of its parent company, AK Holdings Inc., also tumbled 12% in response to the devastating news.
Global Markets and Economic Indicators
- Treasury Yields: The 10-year yield edged down one basis point to 4.62%, after climbing to 4.64% last week. Yields remain elevated as the Federal Reserve signals fewer rate cuts in 2025, keeping pressure on bonds and equities alike.
- Commodities: Oil prices held steady in subdued year-end trading, with crude set to close 2024 with a modest loss. Iron ore prices surged, boosting the Australian dollar against its G10 peers.
- Currencies: The Bloomberg Dollar Spot Index remained unchanged Monday. The index has gained over 7% in 2024, bolstered by expectations of “America First” policies under President-elect Donald Trump.
Tech Stocks Lead U.S. Market Declines
The S&P 500 and Nasdaq 100 dropped 1.1% and 1.4%, respectively, on Friday, with losses across all major industry groups. The tech-heavy Nasdaq bore the brunt as the so-called “Magnificent Seven” megacap stocks, which contributed to over half of the S&P 500’s 2024 gains, saw profit-taking.
“Santa has already come — have you seen the performance this year?” remarked Kenny Polcari, strategist at SlateStone Wealth LLC. He cautioned against making major investing decisions in the holiday-shortened trading week, citing light volumes and exaggerated moves.
High Expectations for Tech Stocks in 2025
This year’s impressive rally has set lofty expectations for further gains in 2025, particularly in the tech sector:
- Analysts project nearly 30% earnings growth for tech stocks next year.
- However, a Bloomberg Intelligence study indicates market-cap shares imply even higher growth expectations—closer to 40%.
U.S. Markets Pause Amid Mourning
Jimmy Carter, the 39th U.S. president, passed away on Sunday at his home in Plains, Georgia. As per tradition, the U.S. stock market typically closes on the day of a presidential funeral. While no formal announcement has been made yet, a potential closure could occur on Jan. 9, the date of Carter’s state funeral.
Read more: Inflation in Focus: What to Expect for the US Economy in 2025
Looking Ahead: The 2025 Outlook
As markets head into the new year, investors face a mix of optimism and caution:
- Key Questions: Will tech stocks sustain their momentum? How will global trade dynamics evolve under new leadership in the U.S.?
- Market Focus: Attention remains on bond yields, inflation trends, and central bank policies as major determinants of market performance in 2025.
What’s your outlook for the year ahead? Share your thoughts in the comments below!
