Singapore, Nov. 28 – Asian stocks retreated on Thursday as traders digested U.S. economic data suggesting that efforts to control inflation have hit a plateau, even as the country’s economy demonstrated continued resilience. The strengthening of the dollar and ongoing geopolitical uncertainties added to the cautious sentiment in global markets.
With the U.S. Thanksgiving holiday limiting market activity for the rest of the week, investors were hesitant to make significant moves.
The MSCI Asia-Pacific index, excluding Japan, slipped by 0.4%. Meanwhile, Japan’s Nikkei gained 0.48%, offering a contrast to the subdued performance in other regional markets. The broader mood was overshadowed by concerns over potential tariff increases and reports of explosions in Ukraine, which kept risk appetite in check.
European Markets Anticipate Gains
Futures in European markets hinted at a positive start for the day. The Euro Stoxx 50 futures climbed 0.57%, Germany’s DAX futures rose 0.38%, and FTSE futures edged up 0.17%.
In France, however, concerns over the government’s new budget and political stability continued to weigh on investor sentiment. On Wednesday, the CAC 40 hit its lowest point since early August, raising alarm bells for the European session.
U.S. Data Highlights Inflationary Challenges
Data released on Wednesday showed a slight uptick in U.S. consumer spending during October, surpassing market expectations. However, the persistent struggle to bring inflation down to the Federal Reserve’s 2% target raised questions about the central bank’s future rate-cutting potential.
The Federal Reserve, which is widely expected to implement a rate cut in December, showed division among officials regarding the trajectory of interest rate adjustments, according to recent policy meeting minutes.
Economists remain cautious. Kristina Clifton of the Commonwealth Bank of Australia noted, “We still anticipate a 25-basis-point cut at December’s meeting. However, if core inflation for November remains robust, it could challenge the Fed’s view that inflation is trending downward.”
Market sentiment reflects these concerns, with traders pricing in a 65% probability of a rate cut in December and an expectation of 75 basis points of easing by the end of 2025.
South Korea Makes a Bold Move
In an unexpected decision, South Korea’s central bank reduced its benchmark interest rate for the second consecutive meeting, reacting to a sluggish economy and lower-than-expected inflation. This move caused the South Korean won to weaken further.
Elsewhere in Asia, the Japanese yen slipped by 0.29% to 151.53 per dollar, remaining close to the one-month high achieved earlier in the week. The yen is on track for its strongest weekly performance since September as expectations mount for a rate hike by the Bank of Japan in the near future.
The euro experienced minor losses after a strong 0.7% gain in the previous session. Comments from European Central Bank officials suggesting a more cautious approach to rate cuts influenced investor sentiment.
The dollar index, which gauges the currency’s performance against six major rivals, edged up 0.11% to 106.23 after dropping significantly in the prior session.
Commodity Prices Show Stability
In commodity markets, oil prices remained steady, reflecting eased concerns over supply disruptions in the Middle East following a ceasefire agreement between Israel and Hezbollah.
Brent crude futures hovered around $72.80 per barrel, while West Texas Intermediate (WTI) crude stood unchanged at $68.70 per barrel.
Gold prices remained flat at $2,634 per ounce but were set for a nearly 4% monthly decline, marking their weakest performance in over a year.
Looking Ahead
With market activity expected to remain subdued through the holiday period, investors are likely to focus on key economic indicators and geopolitical developments in the coming weeks. The interplay of inflationary pressures, central bank decisions, and global tensions will continue shaping market movements.
As uncertainties persist, traders and policymakers alike remain on edge, navigating a complex and evolving global economic landscape.