(Bloomberg) — Asian stocks rebounded from last week’s selloff as muted US inflation helped reignite Federal Reserve rate cut bets. The dollar steadied after a retreat.
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The MSCI Asia Pacific Index snapped a six-day decline, with benchmarks in South Korea and Taiwan rising more than 1%. US equity contracts climbed after the so-called core personal consumption expenditures price index increased at the slowest pace since May, spurring a 1.1% rise in the S&P 500 Index on Friday.
Monday’s moves offer investors some respite after a stream of robust US economic data saw the Fed scale back the number of cuts it anticipates in 2025. Overall sentiment remains cautious as investors brace for the prospect of sweeping global tariffs imposed by US President-elect Donald Trump, and as China continues to see a lackluster economic recovery.
“Lower than expected US core PCE inflation data for November suggests that the Fed may have gotten too negative on inflation,” Shane Oliver, head of investment strategy and chief economist at AMP Ltd., wrote in a note to clients. “Our overall assessment remains that the trend in shares is still up, including for Australian shares, but expect a far more volatile and constrained ride over the year ahead.”
Australia’s 10-year bond yield fell 10 basis points on Monday amid holiday-thinned trading, tracking a Friday rally in US peers driven by the PCE data. US Treasuries were steady in Asia trading.
A Bloomberg gauge of the dollar was little changed after sliding 0.5% on Friday. President Joe Biden signed funding legislation to keep the US government operating until mid-March, avoiding a year-end shutdown and kicking future spending decisions into Trump’s presidency.
In China, semiconductor and computing stocks gained after Premier Li Qiang urged more innovation and infrastructure development in these sectors. Broader equity benchmarks posted modest gains.
“At current level, we do think there is some upside that can be driven by more policy easing and fundamental improvements,” Si Fu, China portfolio strategist at Goldman Sachs Group Inc., said in a Bloomberg TV interview. Domestic policy easing will offset some of the negative impact from US tariffs, and the brokerage looks forward to more concrete measures on consumption, she added.
