Asian Stocks Start the Week on a Cautious Note
Asian stocks started the week on a cautious note as traders navigate deteriorating China-Japan relations, a heavy slate of central bank decisions and the broader outlook for risk assets heading into next year.
MSCI Inc.’s gauge of Asian equities fell 0.1%, in line with the decline in US stock index futures. Shares in Australia also dropped while the Nikkei 225 lost 0.4%. Japan’s economy shrank in the three months through September, the government confirmed in a revised report, while the nation’s relations with China cooled further.
Investor Caution and Central Bank Decisions
The subdued tone in markets reflected increasing investor caution over the durability of this year’s AI-driven rally, with global equities hovering near October’s record highs. Markets were also bracing for policy announcements from central banks spanning Australia to Brazil and the US, just as renewed inflation pressures prompt a reassessment of next year’s monetary outlook.
While the Federal Reserve is still likely to cut interest rates on Wednesday, “the rate path for 2026 is more uncertain as members balance lingering price pressures from tariffs, a cooling labor market, the likely pick-up in economic activity in the coming months,” Barclays strategists including Andrea Kiguel wrote in a note to clients. “We think 2026 is likely to be a year of prolonged holds, though markets could try to add hike premiums if inflation momentum persists.”
Japan-China Relations and Trade Data
Japan-China relations and assets in both countries are a focus in Asia after a Chinese fighter aircraft over the weekend, trained fire-control radar on Japanese military jets for the first time.
Traders will also be keeping a close eye on Chinese trade data for November to help gauge the health of the economy and the impact from modest US tariff relief. Trade Representative Jamieson Greer at the weekend said China has been complying with the terms of the bilateral trade agreements so far.
Commodities and Currency Markets
In commodities, gold edged higher as China’s central bank added to its reserves for a 13th straight month in November. Oil was steady after settling above $60 a barrel on Friday, signaling that a risk premium persists as a peace deal between Russia and Ukraine remains elusive.
On Friday, the S&P 500 Index rose 0.2% to inch closer to a record high as a dated reading of the Fed’s preferred inflation gauge met expectations. Treasuries declined, pushing the 10-year yield up four basis points to 4.14% and closing out their worst week since April, after conflicting economic data cast fresh uncertainty on the scale of potential Fed rate cuts next year.
Indian Market Outlook
Indian regulators held IndiGo’s chief executive accountable for the severe disruptions that have roiled the country’s biggest airline in recent days, faulting the company for “significant lapses in planning, oversight, and resource management.”
Eli Lilly & Co., Pfizer Inc.and Johnson & Johnson secured spots on China’s first innovative drug catalog, opening a new market channel and boosting sales prospects for costly, cutting-edge treatments.
Key Market Moves
Some of the main moves in markets:
- S&P 500 futures were little changed as of 9:17 a.m. Tokyo time
- Hang Seng futures were little changed
- Japan’s Topix was little changed
- Australia’s S&P/ASX 200 fell 0.3%
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.1642
- The Japanese yen was little changed at 155.22 per dollar
- The offshore yuan was little changed at 7.0690 per dollar
- The Australian dollar was little changed at $0.6637
- Bitcoin fell 0.2% to $90,077.67
- Ether fell 1.2% to $3,048.17
- The yield on 10-year Treasuries was little changed at 4.13%
- Japan’s 10-year yield advanced 1.5 basis points to 1.950%
- Australia’s 10-year yield advanced three basis points to 4.72%
- West Texas Intermediate crude rose 0.1% to $60.15 a barrel
- Spot gold rose 0.2% to $4,204.84 an ounce