Eyes on Fed Minutes

Stocks in Asia retreat from recent highs, while US futures steady and the dollar holds gains ahead of key Fed data

By Ahmed Azzam | @3zzamous | 3 January 2024

Market open
  • Dollar kicks off 2024 with best day since March on Fed doubt

  • Stocks and bonds drop in tandem for worst start to year in decades

  • Investors await Fed's December meeting minutes and US labor market data

Pullback in Asian equity markets

Asian equity markets mostly fell on Wednesday, echoing the previous night's losses on Wall Street. Investors engaged in profit-taking and reevaluated their expectations for interest rate cuts by major central banks. Key markets in Australia, South Korea, Hong Kong, and mainland China all witnessed declines, while Japanese markets were closed for holidays.

South Korea and Australia recoil from peaks

Equity benchmarks in South Korea and Australia saw a downturn after reaching their highest levels since mid-2022. Meanwhile, a gauge of Chinese Kong tech shares dropped by over 2%, reflecting broader market sentiment.

US futures and European contracts stabilize

In the US, futures were little changed after a significant drop in the Nasdaq 100 – the most in over two months. Similarly, European contracts saw a decline. The dollar held onto its gains as investors anticipated the release of the Federal Reserve's December meeting minutes. Upcoming US job openings data and Friday’s nonfarm payrolls report are expected to provide further insights into the labor market's health.

US economic data in focus

The ISM Manufacturing Index in the US is likely to show a modest increase for December, buoyed by an improvement in new orders supporting production activity. Job openings are also expected to have risen slightly to 8.82 million in November. Traders are particularly focused on the upcoming release of the latest Fed minutes. Any dovish surprises, though unlikely, could significantly impact a market that has grown skeptical of the Fed's guidance.