Investing.com– Asian shares fell sharply on Monday, led by losses in Australian and Hong Kong stocks, as investors reassessed the likelihood of a U.S. interest rate cut following stronger-than-expected wages data released last week.
Stock markets in Japan were closed for the holiday, which contributed to a decrease in trading volume.
U.S. stock index futures were largely flat in Asian trade as investors awaited key inflation data due later this week.
Asian stocks under pressure as markets downgrade Fed rate cut expectations
The Hong Kong index fell xx%, while China fell on Monday, and the indexes fell a little.
China’s trade data failed to provide any support to stocks, despite rising more than expected in December.
Australia fell 1.4 percent. Shares in Insignia Financial Ltd (ASX:) rose almost 3% to a three-year high on Monday after receiving a sweetened takeover offer from Bain Capital.
On Friday, data showed that rose unexpectedly in December and the unemployment rate fell, signaling a strong end to 2024 for the labor market. That supports expectations that the Federal Reserve will leave interest rates steady this month.
The Fed cut rates by 100 basis points in 2024, but hinted at fewer cuts than expected in 2025 in the face of sticky inflation and a resilient economy.
“Another positive US jobs surprise will reinforce the belief that Federal Reserve officials are under no pressure to cut interest rates in the near term. We will get a revision to the jobs benchmark next month, which could change the story, but in a sticky inflation environment, risks are increasingly tilted towards an extended Fed pause,” ING analysts said in a recent note.
Goldman Sachs now predicts the Fed will cut interest rates twice this year, a revision to their previous forecast of three rate cuts.
Elsewhere in Asia, the Philippines fell more than 1%, while Singapore lost 0.3%.
India indicated a sharp drop in the opener.
South Korea’s index fell 1% amid ongoing political unrest in the country. South Korean investigative authorities are trying to arrest impeached President Yoon Suk Yeol for his attempt to impose martial law.
A barrage of data is available this week
Globally, the focus will be squarely on key US data releases this week, including December (PPI) on Tuesday, Wednesday, Thursday and Friday.
China is also due to release several key economic indicators that will provide insight into its economic performance at the end of 2024. Data for the full year 2024 is due on Friday. Additionally, December data and figures are also expected on Friday.
In Australia, December comes on Thursday.
