Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Asia’s stock markets adopted a cautious tone on Monday, November 17, as traders anticipated a week dominated by key U.S. economic data, including a delayed September jobs report, and significant corporate earnings, with particular attention on chipmaker Nvidia. Investor sentiment was shaped by shifting expectations for U.S. interest rate cuts and concerns regarding the sustainability of the artificial intelligence stock rally, alongside regional economic contractions and diplomatic tensions.
Monetary Policy and U.S. Data
Market expectations for a U.S. interest rate cut in December have receded, dropping from over 60% a week ago to 40% on Monday, following hesitant statements from policymakers. Federal Reserve officials, including Kansas City Federal Reserve President Jeffrey Schmid and Dallas Federal Reserve President Lorie Logan, recently delivered hawkish remarks, casting doubt on the immediate need for rate reductions. This week’s delayed U.S. September jobs report, scheduled for Thursday, will be closely watched, despite private surveys already signaling a slowdown in the labor market. S&P 500 futures posted a 0.3% gain in early trade, while ten-year U.S. Treasury yields held at 4.156% in Tokyo.
Asian Market Performance
Japan’s Nikkei index remained flat, though tourism and certain retail stocks experienced significant declines. This followed a caution issued by China to its citizens against visiting Japan, stemming from a deepening diplomatic dispute. Shares of department store operator Isetan Mitsukoshi and cosmetics-maker Shiseido each fell approximately 10%. Separately, data revealed that Japan’s economy contracted for the first time in six quarters, primarily due to the impact of U.S. tariffs. The Nikkei newspaper reported that new Prime Minister Sanae Takaichi is considering a stimulus package of around 17 trillion yen ($110 billion).
In Australia, the bourse reached a four-month low after BHP shares dropped 0.7%. This decline occurred after a British high court found the company liable for a dam collapse in Brazil.
Nvidia Earnings and AI Rally
The upcoming earnings report from Nvidia this week is widely viewed as a critical test for the strong rally in artificial intelligence stocks. Nvidia’s shares have surged approximately 1,000% since the launch of ChatGPT in November 2022, including a year-to-date gain of over 40% that propelled the company to surpass $5 trillion in market value last month. Other major U.S. retailers, including Home Depot, Target, and Walmart, are also scheduled to report earnings this week.
Currency and Commodities
In foreign exchange markets, the U.S. dollar edged higher, holding the euro at $1.1607. Gold prices recovered from Friday’s losses, trading at $4,084 an ounce. Brent crude futures saw a 1% decline in the Asia morning, reaching $63.78. Bitcoin, often considered a barometer of liquidity and technology stock sentiment, was recovering from its largest weekly fall since March, trading at $94,717 after losing more than 10% last week.
Outlook for the Week
The week ahead presents a complex landscape for global markets, with investor attention divided between the implications of U.S. monetary policy, the performance of key technology companies, and ongoing geopolitical and economic challenges in Asia.
