Asian Markets Decline Following Wall Street Slump Despite Strong U.S. Economic Data

HONG KONG (AP) — Asian markets experienced a mostly lower trend on Wednesday following a decline in shares on Wall Street, even as reports indicated a stronger-than-expected U.S. jobs market and business activity.

U.S. futures and oil prices saw an uptick.

Japan’s primary index, the Nikkei 225, remained stable at 40,079.09. The Japanese yen weakened slightly against the dollar, which traded at 158.19 yen, a slight increase from 158.06.

In Hong Kong, the Hang Seng index fell by 1.6% to close at 19,137.88. Similarly, the Shanghai Composite index dropped 1.5% to settle at 3,182.49. Particularly affected were shares of Tencent, which decreased by 2.1%, and CATL, known as the world's largest battery manufacturer, whose shares dropped by 1.4%. Both companies were mentioned in a list from the U.S. Defense Department linking them to China’s military.

Moreover, uncertainties continue to surround China as potential tariffs and policy changes are anticipated with the incoming presidency of Donald Trump, effective January 20.

Conversely, South Korea's Kospi index increased by 1.2% to reach 2,522.75, and Australia’s S&P/ASX 200 saw a rise of 0.7%, ending the day at 8,348.60.

On Tuesday, the S&P 500 index saw a decrease of 1.1%, concluding at 5,909.03 after initially gaining momentum. The Dow Jones Industrial Average also fell by 0.4%, settling at 42,528.36, while the Nasdaq composite plunged by 1.9%, finishing at 19,489.68.

The decline in stocks was attributed to increasing yields in the bond market, which rose sharply following the release of positive economic reports. One report indicated that U.S. employers had more job openings than anticipated at the end of November, while another noted an unexpected surge in activity for finance, retail, and services sectors in December.

These robust reports are encouraging for job seekers and those concerned about a potential recession, which seemed increasingly likely to some. However, a thriving economy may exert ongoing pressure on inflation, diminishing the likelihood of interest rate cuts that often favor Wall Street. The Federal Reserve has been cutting its main interest rate since September with the aim of boosting the economy, yet it has suggested that a pause in these cuts may be on the horizon.

Concerns regarding President-elect Trump’s potential tariffs have also intensified worries about inflation rates, which have persistently hovered above the Fed's 2% target. The Institute for Supply Management's Tuesday report on the U.S. services sector revealed troubling trends, indicating that price increases sped up in December.

As expectations for reduced interest rate cuts in 2025 have been building, longer-term Treasury yields have risen. This upward trend has been fostered by apprehensions regarding other potential Trump policies, such as tax cuts, which could increase the U.S. government’s debt and further raise yields.

The rising yields render Treasury bonds more appealing to investors typically inclined to buy stocks, consequently pressuring stock prices downward. Additionally, the 10-year Treasury yield climbed to 4.69% from 4.63% shortly after Tuesday’s reports, up from just 4.15% in early December.

With concerns about a slowing U.S. economy fading and the 10-year Treasury yield stabilizing above 4.50%, analysts from Bank of America, led by Ohsung Kwon, have commented that the market is shifting into a scenario where "good news may be viewed as bad news" once again.

Attention now turns to the upcoming U.S. job market update scheduled for Friday, where economists predict a slowdown in overall hiring, estimating a growth of 156,500 jobs for December, according to FactSet.

In energy trading, benchmark U.S. crude rose by 37 cents to $74.62 per barrel, while Brent crude, an international standard, increased by 29 cents to $77.34 per barrel.

In currency markets, the euro traded at $1.0347, slightly up from $1.0341.

Asian, Markets, WallStreet