Stock markets across Asia opened the final week before Christmas on a strong note, rallying in tandem with Wall Street as renewed hopes for US interest rate cuts and easing concerns over artificial intelligence spending boosted investor sentiment.
Data Fuels Rate Cut Optimism
The positive shift followed key economic reports from the United States last week. US unemployment reached a four-year high in November, while a separate report indicated that the rise in consumer prices slowed more than analysts had anticipated.
This combination of a softening labour market and moderating inflation has strengthened expectations that the Federal Reserve will move to lower borrowing costs in early 2026. Investors had previously scaled back such forecasts after the Fed hinted it might pause further cuts following its meeting earlier in December.
"This labour market softening and inflation moderation strengthened Federal Reserve easing expectations for 2026," noted IG market analyst Fabien Yip. However, she cautioned that the low inflation reading might be temporary, potentially suppressed by data collection disruptions, and could normalise higher later.
Tech and Metals Lead the Charge
Asian technology firms were at the forefront of Monday's advances. Major players like South Korea's Samsung Electronics, Taiwan's TSMC, and Japan's Renesas were among the best performers. This tech bounce followed a sell-off driven by worries over stretched valuations and the vast capital being poured into AI ventures.
The rally tracked a significant surge on Wall Street, particularly on the Nasdaq, reignited by a stellar earnings report from chip giant Micron Technology. Further optimism came from news that Oracle will take a 15% stake in a TikTok joint venture, securing the app's operations in the US.
Meanwhile, gold soared to a fresh record high above $4,388 per ounce, with silver also hitting a new peak. The precious metals, seen as safe-haven assets, benefited from the prospect of lower US interest rates and ongoing geopolitical tensions, including Washington's oil blockade against Venezuela and a Ukrainian strike on a Russian shadow fleet tanker.
Yen Weakness and Regional Gains
In currency markets, the Japanese yen remained under pressure, falling against the dollar after the Bank of Japan hiked interest rates to a 30-year high on Friday. The central bank's governor, Kazuo Ueda, chose not to signal more increases for the new year, leading to a sell-off.
Japan's top currency official, Atsushi Mimura, expressed deep concern on Monday about the "one-directional, sudden moves" in the yen, stoking speculation that authorities might intervene to support the currency.
Equity markets across the region posted healthy gains. Tokyo's Nikkei 225 was the standout, jumping 2.0% to 50,480.76, buoyed by the weaker yen. Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, and Manila all advanced.
Stephen Innes of SPI Asset Management observed, "Asian equity markets are stepping onto the floor with a constructive bias, taking their cue from Friday's solid rebound in US stocks and the growing belief that the final stretch of the year still belongs to the bulls."
Key Market Figures (as of approx. 0230 GMT)
Tokyo - Nikkei 225: UP 2.0% at 50,480.76
Hong Kong - Hang Seng Index: UP 0.2% at 25,728.31
Shanghai - Composite: UP 0.6% at 3,914.36
Dollar/Yen: DOWN at 157.40 yen
Gold: Record high above $4,388/oz
New York - Dow (previous close): UP 0.4% at 48,134.89
London - FTSE 100 (previous close): UP 0.6% at 9,897.92
