- Asian stock markets are struggling due to South Korea's slide and a surprising drop in China's consumer prices.
- Central banks worldwide, including the ECB, SNB, and BoC, are expected to cut rates this week.
- Political unrest in France and South Korea, along with the fall of Syria's regime, have complicated the global economic outlook.
- Despite these challenges, there is a positive outlook for global growth into the year-end.
Asian stock markets are grappling with a slide in South Korea and a surprising drop in China's consumer prices, according to a report by Wayne Cole on December 9, 2024. The South Korean stock market is skidding, and Wall Street futures are flat, leading to a muted market reaction. The European Central Bank (ECB), Swiss National Bank (SNB), and Bank of Canada (BoC) are all expected to cut rates this week.
The South Korean market's slide comes ahead of a week filled with central bank meetings that are expected to lower borrowing costs. Meanwhile, U.S. inflation data is the last obstacle to further policy easing in the country. Chinese figures released on Monday showed a surprisingly large fall of 0.6% in consumer prices in November, pulling annual inflation down to just 0.2%. This underlines the need for more drastic policy stimulus.
The political turmoil in France and South Korea has been compounded by the fall of Syrian President Bashar al-Assad's regime, further complicating an already fraught situation in the Middle East. This has dampened the positive reaction to U.S. November payrolls, which showed enough recovery to alleviate concerns of a slowdown, but not enough to prevent a rate cut from the Federal Reserve next week.
Global Economic Outlook Amid Political Turmoil
The next test is a U.S. consumer price report due out Wednesday, where the core is expected to hold at 3.3% for November, which should not impede an easing. Bruce Kasman, head of economic research at JPMorgan, stated, Incoming data support our call for global growth lift into year-end, despite a slipping Euro area and building political stress.
Futures imply an 85% chance of a quarter-point easing at the Fed's December 17-18 meeting, up from 68% before the jobs figures, and have a further three cuts priced in for next year. This outlook, combined with the bull run in tech stocks, boosted the Nasdaq market by over $1 trillion in value last week alone. On Monday, S&P 500 futures and Nasdaq futures were both slightly lower.
South Korean stocks slid 2.4% even as authorities pledged all-out efforts to stabilize financial markets amid uncertainty over the fate of President Yoon Suk Yeol. The dollar added 0.8% on the won to 1,435.53, nearing last week's peak of 1,443.40. Japan's Nikkei firmed 0.2%, helped by an upward revision to economic growth, while Chinese blue chips dipped 0.5%.
Central Banks' Response to Economic Challenges
Among the many policy meetings this week, the European Central Bank is fully expected to cut by 25 basis points on Thursday, with a one-in-five chance of 50 basis points. Christian Keller, a Barclays economist, said, "With geopolitical uncertainty high and conflicting signals from hard and soft data, monetary policy remains the only game in town to support economic activity, especially in the absence of strong political leadership in Paris and Berlin."
Canada's central bank is now expected to ease by a half point on Wednesday following a shock rise in unemployment for November. The Reserve Bank of Australia holds its meeting on Tuesday and is one of the few seen standing pat, while Brazil's central bank is set to hike again to contain inflation.
Oil prices gained some support from events in the Middle East, though markets are preoccupied with the risk of weak demand, particularly from China. Brent added 30 cents to $71.41 a barrel, while U.S. crude rose 31 cents to $67.51 per barrel.
