Asia-Pacific stocks saw a slight decline, driven by a 1.7% drop in South Korea’s KOSPI index amidst concerns over a potential new martial law. While Chinese and Hong Kong stocks gained modestly, Japan’s Nikkei fell but remained up for the week. In the U.S., attention is on the upcoming non-farm payrolls report, with expectations for job growth amidst market sensitivity to interest rate changes. Bitcoin faced volatility after surpassing $100,000, while oil prices continued to decline.
Market Overview: Asia-Pacific Stocks and Economic Indicators
The MSCI index tracking Asia-Pacific stocks outside Japan experienced a slight dip of 0.3%. This decline was influenced by a notable 1.7% fall in South Korea’s KOSPI index. The Korean won also weakened, dropping 0.8% to 1,425.42 per dollar, edging closer to its recent low of 1,443.4, following President Yoon Suk Yeol’s declaration of martial law.
In a related development, South Korea’s main opposition party, the Democratic Party, revealed on Friday that lawmakers were on high alert after receiving several reports regarding a potential new martial law declaration, according to Yonhap news agency.
Meanwhile, Chinese blue-chip stocks saw a modest increase of 0.2%, and Hong Kong’s Hang Seng index rose by 0.4%. Japan’s Nikkei index experienced a decline of 0.6%; however, it remains up 2.5% for the week. Recent data indicates that local wages in Japan surged at the quickest rate in 32 years in October, although market sentiment leans toward no expected rate hike from the Bank of Japan this month.
U.S. Non-Farm Payrolls Report and Market Reactions
Attention is focused on the U.S. non-farm payrolls report, which is scheduled for release today. Predictions suggest an increase of 200,000 jobs in November, following a disappointing gain of just 12,000 jobs in October, a figure impacted by hurricanes and strikes. The unemployment rate is anticipated to have risen slightly from 4.1% to 4.2%.
Markets are hoping for a ‘Goldilocks’ scenario, but many uncertainties loom. A robust jobs report could jeopardize prospects for interest rate cuts, while unexpectedly weak data might heighten economic concerns. Futures trading indicates a 70% chance of a Federal Reserve rate cut on December 18, highlighting the market’s sensitivity to a strong jobs report. In fact, futures have recently adjusted to incorporate an additional quarter-point cut for 2025.
Chris Weston, head of research at Pepperstone, noted that a result below 100,000 jobs alongside an unemployment rate of 4.2% or higher could pressure stocks, even if it ensures a 25 basis point rate cut. Conversely, a jobs report exceeding 250,000 with an unemployment rate of 4.1% or less might create market instability, as it would suggest the Fed could hold off on easing measures in December.
In the wake of these developments, Wall Street saw a pullback from its record highs, with investors recalibrating their positions ahead of the jobs report. Nevertheless, the tech-heavy Nasdaq has gained 2.5% since the start of the week, contributing an impressive $1 trillion to its market valuation.
The U.S. dollar, which had been strong, fell by 0.6% overnight against other currencies, settling at 105.84, its lowest point in three weeks. Investors are cautious of a potential sharp decline, given the current market’s long positions on the dollar. In contrast, the euro rebounded by 0.7% overnight, stabilizing at $1.0580, following the resignation of French Prime Minister Michel Barnier, a much-anticipated event in the country’s political landscape.
Bitcoin’s Recent Volatility
Bitcoin, which recently surpassed the $100,000 milestone as investors anticipated favorable regulatory changes in the U.S., is now experiencing profit-taking. It fell to a low of $92,092 before finding some stability at $98,265 on Friday, marking a 1% increase for the day.
According to Tony Sycamore, an analyst at IG, the recent spike in volatility resembles a classic market top. While this does not signify the end of the bitcoin bull cycle, it suggests a forthcoming consolidation phase in the next few days or weeks. On Thursday, former President Trump announced the appointment of ex-PayPal COO David Sacks as the White House czar for artificial intelligence and cryptocurrencies.
In the bond market, Treasury yields remained relatively steady on Friday. The two-year yield held firm at 4.15%, after a slight rise of 2 basis points overnight, while the benchmark 10-year Treasury yields showed little change, maintaining a steady rate of 4.178% throughout the week.
Oil prices continued their downward trend on Friday, despite OPEC+’s decision to delay the planned production increase until April. West Texas Intermediate (WTI) crude oil dipped by 0.2% to $68.18 a barrel, following a 0.4% decline the night before. Gold prices also remained within a narrow range, decreasing by 0.4% to $2,621.89 an ounce, reflecting a 1.2% decline for the week.