Asia stocks tumble as markets temper Fed rate cut expectations

Investing.com– Asian stocks fell sharply on Monday led by losses in Australian and Hong Kong shares as investors reassessed the likelihood of U.S. interest rate cuts following stronger-than-expected payroll data released last week.

Stock markets in Japan were closed for a holiday, contributing to softer trading volumes.

U.S. stock index futures were largely steady in Asian trade, while investors awaited crucial inflation data due later this week.

Asia shares under pressure as markets lower Fed rate cut expectations

Hong Kong’s index slumped xx%, while China’s  fell and  indexes inched lower on Monday.

Chinese trade data failed to provide any support to stock markets, despite showing  grew more than expected in December.

Australia’s dropped 1.4%. Insignia Financial Ltd (ASX:) shares rose nearly 3% to a three-year high on Monday after receiving a sweetened buyout bid from Bain Capital.

On Friday, data showed that unexpectedly picked up in December, and the unemployment rate dropped, signaling a strong end to 2024 for the labor market. This supports expectations that the Federal Reserve will leave interest rates steady this month.

The Fed has reduced rates by 100 basis points in 2024 but signaled fewer-than-expected cuts in 2025 in the face of sticky inflation and a resilient economy.

“Yet another upside surprise on US jobs numbers will intensify the belief that Federal Reserve officials are under no pressure to cut interest rates in the near term. We will get the benchmark jobs revisions next month, which could change the story, but in an environment of sticky inflation the risks are increasingly skewed towards an extended pause from the Fed,” ING analysts said in a recent note.

Goldman Sachs now anticipates the Fed will reduce interest rates twice this year, a revision from their previous prediction of three rate cuts.

Elsewhere in Asia, the Philippines’ fell more than 1%, while Singapore’s  lost 0.3%.

India’s indicated a sharp drop at open.

South Korea’s  index fell 1% amid ongoing political unrest in the country. South Korean investigating authorities are trying to arrest impeached President Yoon Suk Yeol over his attempt to impose martial law.

Data barrage on tap this week

Globally, the focus will be squarely on key U.S. data releases this week including the December (PPI) on Tuesday, the on Wednesday, on Thursday, and on Friday.

China is also scheduled to release several key economic indicators that will provide insights into its economic performance at the close of 2024. The country’s full-year 2024 figures are due on Friday.  Additionally, December’s data, and figures are also due on Friday.

In Australia, December is due on Thursday.