Asian Shares Rise on Hope of Easing Policy in 2025
Asian shares rallied on Monday, driven by a benign reading on US inflation and relief that Washington had averted a government shutdown. The S&P 500 was up 23% for the year, but at 12 largest companies’ gain was only 8%, according to analysts at BofA, who warned that such extreme concentration was a vulnerability going into 2025.
The US inflation report last week demonstrated that core inflation was lower than expected, 0.11%, providing some respite from the Federal Reserve’s hawkish stance. This led to a rally in Fed funds futures, now implying a 53% chance of a rate cut in March and 62% in May.
The prospect of fewer rate cuts has combined with expectations of more debt-funding government spending to pressure bond markets, with 10-year yields surging almost 42 basis points in just two weeks. The dollar has also been buoyed by a strong US economy and higher bond yields, making it a challenge for commodities and gold.
In currency markets, the US dollar held near two-year highs, while the euro look vulnerable. The strong dollar is also a burden for emerging market countries, which are trying to stop their currencies from falling too far and stoking domestic inflation.
Oil and gold prices also felt the impact of the strong dollar and concerns over Chinese demand following recent retail sales figures. Gold stood at $2,624 an ounce, down 1% for the week, while oil was at $73.00 a barrel.