Asian stock markets were largely lower on Wednesday, bucking the trend of positive US economic data. Wall Street saw declines, despite better-than-expected job market and business activity reports from the U.S. This unexpected market reaction highlights the complex interplay between economic indicators and investor sentiment.
US futures and oil prices, however, saw upward movement. The Nikkei 225 in Japan dipped slightly, while Hong Kong's Hang Seng and the Shanghai Composite showed minimal change. Tencent and CATL, both listed on the Shanghai Composite, experienced declines following their inclusion on a U.S. Defense Department list linked to Chinese military ties.
Conversely, South Korea's Kospi and Australia's S&P/ASX 200 posted gains. The previous day's US market downturn reflected the impact of rising bond yields on equities. The strong US jobs report and improved services sector data from the Institute for Supply Management (ISM) were initially positive signs.
However, the robust economic indicators could exacerbate inflationary pressures and potentially limit the Federal Reserve's ability to cut interest rates. The Fed, which initiated rate cuts in September, is signaling a slowdown in this easing cycle.
Rising bond yields and concerns about potential tariffs further weighed on the stock market. Higher yields make government bonds more attractive, diminishing investor interest in stocks. The yield on the 10-year US Treasury note climbed to 4.69%, reflecting this trend.
Market analysts predict a "good news is bad news" environment, indicating that positive economic data may not translate into sustained stock market gains. This anticipation is further fueled by expectations of a slower pace of job growth in December, as suggested by preliminary estimates.
Energy markets saw increases. Benchmark US crude oil and Brent crude prices rose slightly. The Euro also strengthened against the US dollar. Investors now await Friday's US jobs report to clarify the market's direction.
