Asian stocks open year’s last trading day cautiously

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Asian stocks opened cautiously on Friday, largely continuing an end-of-year rally that has been boosted by investors’ expectations of a US Federal Reserve rate cut as early as March.

Hong Kong and Tokyo opened the last trading session of the year marginally higher, with Japanese bourses clawing back some ground after losing steam to a strengthening yen a day earlier.

Currency markets remained largely flat Friday morning, but the US dollar is set to finish its worst year since the onset of the Covid-19 pandemic, with investors betting on a Fed rate cut and that other countries might keep rates higher for longer.

Asian stocks are on track for their best year since the pandemic but continue to underperform global peers.

Chinese markets, in particular, have been weighed by concerns regarding the country’s sluggish economic recovery from its long-lasting and strict pandemic lockdowns.

Still, there was positive news in the Chinese tech sector on Friday, with Huawei saying it expected 2023 revenue to grow by nine percent, despite facing continuing US sanctions.

On Thursday, the Dow eked out a fresh record, while the S&P 500 fell a bit short of an all-time high despite finishing the day with modest gains.

US equities have trended higher since late October as the market has embraced moderating inflation and a strong labour market in the belief the US economy can avoid recession.

Data from the US Department of Labor on Thursday showed a slight increase in unemployment claims. The level remains low by historic standards, however.

Analysts said they expected year-end market activity to continue to be positive, but within a relatively thin band of trading volumes.

“Investors appear satisfied to let the market slide sideways into year-end, with sellers already done,” said investor Louis Navellier in a note.

Global oil prices have stabilised after worries regarding Red Sea shipping disruptions eased earlier this week, following the formation of a US-led naval coalition to police the route against attacks by Yemen’s Huthi rebels.

US oil prices fell more than three percent despite a weekly inventory report that showed lower stocks of crude oil and gasoline.

Gold retreated from its recent rally in early Friday trade, down 0.9 percent from its highest level a day earlier.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225 (BREAK): DOWN 0.2 percent at 33,470.37

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 17,006.66

Shanghai – Composite: UP 0.4 percent at 2,967.41

New York – Dow: UP 0.1 percent at 37,710.10 (close)

London – FTSE 100: FLAT at 7,722.74 (close)

Euro/dollar: UP at $1.1074 from $1.1066 on Thursday

Dollar/yen: FLAT at 141.42 yen from 141.41 yen

Pound/dollar: UP at $1.2737 from $1.2728

Euro/pound: FLAT at 86.94 pence from 86.92 pence