HONG KONG — Asian stock markets faced declines on Monday following a drop in U.S. stocks, spurred by robust job numbers that sparked concerns over inflation. Markets in Japan were closed for a holiday.
In the U.S., futures fell while oil prices surged by over $1 a barrel after the Biden administration imposed additional sanctions against Russia’s essential energy sector, in response to its ongoing conflict in Ukraine. The newly announced sanctions, deemed the most consequential to date, target Russia’s oil and liquefied natural gas sectors, which are vital to its economy. As a result, U.S. benchmark crude jumped $1.23, reaching $77.80 a barrel, while Brent crude increased by $1.19 to hit $80.95 a barrel.
China’s trade figures drew attention, as exports accelerated more than anticipated in December, with factories rushing to fulfill orders ahead of potential higher tariffs. Exports rose by 10.7% year-over-year, outperforming economist predictions of a 7% increase. Meanwhile, imports grew by 1%, contrary to forecasts of a 1.5% decrease, leading to a trade surplus of $104.84 billion for China. However, this positive news didn’t translate into gains for regional stocks, causing Hong Kong’s Hang Seng Index to drop by 0.8% to 18,911.21, while the Shanghai Composite Index declined by 0.3% to 3,160.76.
“We are witnessing a precarious market sentiment driven by uncertainty regarding the impact of the incoming Trump administration’s ‘America First’ trade policies on Asian economies, particularly China,” noted Stephen Innes from SPI Asset Management.
Australia’s S&P/ASX 200 index fell by 1.2%, closing at 8,191.90, while South Korea’s Kospi index decreased by 1% to 2,489.56.
In the U.S. on Friday, the S&P 500 index fell 1.5% to 5,827.04, marking its fourth week of losses in recent weeks. The Dow Jones Industrial Average dropped 1.6% to 41,938.45, and the Nasdaq composite also saw a decline, falling 1.6% to 19,161.63. This drop was influenced by the bond market, where yields rose sharply following a report indicating that U.S. employers added significantly more jobs than anticipated last month.
While a strong job market is generally beneficial for workers, it also raises concerns about inflation, as it keeps the economy active. This has led to speculation that the Federal Reserve may be less likely to cut interest rates, which typically benefits the stock market by stimulating the economy and enhancing investment returns.
The Fed has already hinted at potentially fewer interest rate cuts than previously anticipated, mainly due to concerns regarding rising inflation, part of which stems from possible tariffs and other policies under the incoming Trump administration. Furthermore, the jobs report might not reflect total strength since manufacturing showed signs of weakness.
After a year of continuous gains, U.S. stock indexes are now experiencing volatility as traders reassess their expectations for future interest rate cuts. A lack of expected cuts could result in lower stock prices or necessitate significant profit growth from companies to balance the effects.
Additionally, insurance firms faced challenges due to ongoing wildfires in the Los Angeles area. Most destroyed homes were located in affluent neighborhoods, often valued above $3 million, which may significantly impact insurer profits. Notably, Allstate’s shares dropped 5.6%, Travelers fell 4.3%, and Chubb lost 3.4% in value.
In contrast, Delta Air Lines saw a 9% increase in its stock price following a better-than-expected profit report for the last quarter of 2024. The airline reported strong demand for travel, which reportedly intensified towards the end of last year, and anticipates this trend to continue into 2025.
On the currency front, the U.S. dollar weakened, trading at 157.34 Japanese yen, down from 157.82 yen. The euro also fell to $1.0220 from $1.0244.
