Asian Stocks Rise After Crypto Market Turmoil

SadaNews - Asian stocks rose on Tuesday after a wave of selling that saw a decline in globally risky assets, led by cryptocurrencies. Attention turned to Japanese government bonds ahead of a 10-year bond auction.

The Asia stock index gained 0.5%, with the South Korean market full of technology stocks leading the charge.

U.S. stock index futures rose slightly in Asian trading after the S&P 500 fell by 0.5% and the Nasdaq 100 dropped by 0.4% on Monday. Bitcoin fluctuated in early Asian trading after a loss of over 5% on Monday.

The last auction of the year for Japan's 10-year bonds, scheduled for later today, gained increasing significance for traders after yields rose amid growing speculation about an interest rate hike. The yen fell against the dollar after it recorded its largest gain in a week on Monday, when Bank of Japan Governor Kazuo Ueda provided the clearest hint yet of a potential interest rate increase soon.

Christina Hooper, Chief Market Strategist at Man Group, wrote in a LinkedIn post: "Japanese bonds should be monitored, as their yields have surged this year due to expectations of a larger fiscal deficit and another rate hike from the Bank of Japan."

She added: "This is important because rising yields on Japanese bonds could push yields on other long-term sovereign bonds higher, increasing borrowing costs for some governments."

Focus Turns to Interest Rate Decisions

Global markets began December on a shaky note on Monday, following new sell-offs in cryptocurrencies and hawkish comments from the Bank of Japan Governor, which heightened risk aversion.

The focus in the coming days will remain on central bank decisions, as the Federal Reserve meets on December 9 and 10, while the Bank of Japan makes its interest rate decision on December 19.

U.S. Treasury bonds stabilized on Tuesday after a decline across the curve on Monday when the yield on 10-year bonds jumped by seven basis points to about 4.1%. The dollar index remained steady, while the yield on Australian 10-year bonds rose by six basis points.

Elsewhere, silver retreated from record levels, as a technical indicator showed the metal had entered overbought territory after a six-session rally ending on Monday. Gold prices also declined while oil edged higher.

Tariq Hursani, Head of Prime Brokerage at Maybank Securities in Singapore, said: "We have seen some stability, but it seems like a rebound driven by changes in investment positions rather than a shift in overall convictions." He added: "Monday’s movements prompted some hesitant investors to step out, but the market remains cautious."

Market Awaits Data to Gauge the Strength of the U.S. Economy

Data released on Monday showed that U.S. manufacturing activity contracted in November at the largest pace in four months due to weak orders.

Federal Reserve officials will get a lagging read on their preferred inflation gauge before next week's interest rate decision. Friday's report is expected to show that inflation pressures remain stable but still persistent. However, the discussion will largely focus on the labor market during the rate-setting meeting.

Although critical data such as the jobs report will be released after the December rate decision, Fouad Rizkzadeh from Forex.com said that this "significantly curtails this week's ability to bring about substantial surprises in interest rate cut expectations."

In addition to upcoming inflation data on Friday, other important economic data this week includes the ADP private sector employment figures for November and a preliminary reading of consumer confidence in December.

Humin Lee, Chief Macroeconomic Strategist at Lombard Odier in Singapore, said: "With the Federal Reserve poised for another potential rate cut and major governments expected to take more growth-supporting fiscal positions, we believe that the global macroeconomic environment will remain favorable for risk-taking investors."