Asia stocks dented by Fed, BOJ rate uncertainty; payrolls data in focus

Most Asian stocks fell on Friday, marking a weak end to their first full trading week of 2025 as investors remained on edge over a slower pace of U.S. interest rate cuts and a potential hike by the Bank of Japan. 

Weak inflation data from China, released earlier this week, also weighed on sentiment, as did increased speculation over President-elect Donald Trump’s plans for trade tariffs against the country. 

Regional markets tracked losses in their global peers, as hawkish signals from the Federal Reserve this week furthered bets on a slower pace of monetary easing this year. 

U.S. stock index futures fell in Asian trade, with investors hunkering down before key nonfarm payrolls data due later in the day, which is likely to factor into the outlook for rates.  Japanese stocks dip amid BOJ rate hike speculation

Japanese stocks were headed for a third straight day in red, as stronger-than-expected wages and private spending data spurred bets that the BOJ could hike rates in January.

The Nikkei 225 fell 0.6%, while the TOPIX lost 0.5%. Both indexes were trading down 1% and 2.2%, respectively, for the week. 

Household spending data read stronger than expected for November, coming just a day after data showed a bigger-than-expected increase in average cash earnings . 

The strong spending data comes as Japanese earners continued to benefit from bumper wage hikes won in early-2024. 

Analysts said that strong spending factored into the BOJ’s expectations of a virtuous cycle of increased inflation, and could invite an interest rate hike from the central bank by as soon as January. 

The yen firmed on this notion, further pressuring Japanese stocks, especially those with export exposure.  Chinese stocks pressured by weak data, tariff jitters 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell about 0.3% each, while Hong Kong’s Hang Seng index was flat.

All three indexes were for weekly losses, with the Hang Seng falling 2.2% after Tencent Holdings Ltd (HK:0700 )- one of its biggest constituents- was added to a U.S. blacklist this week.

The addition- which was still done under the Biden administration- raised concerns over just how much harsher U.S. rhetoric against China will turn once Trump takes office on January 20.

Sentiment towards China was further undermined by weak inflation data released this week, although the reading also spurred some bets on more stimulus measures from Beijing. 

Broader Asian markets were largely negative, as risk appetite weakened ahead of the U.S. payrolls data. 

Australia’s ASX 200 index fell 0.6%, while Singapore’s Straits Times index slid 1.5%.

South Korea’s KOSPI was flat amid continued political turmoil in the country, as authorities sought to arrest President Yun Suk Yeol over a failed attempt to impose military law.

Futures for India’s Nifty 50 index pointed to a flat open, with a string of key Indian corporate earnings due in the coming days. But the index was nursing steep losses in recent weeks, amid waning confidence in the Indian economy.

Source: Investing.com