Asian equities showed signs of resilience on Friday, edging higher after a subdued start to the year. The MSCI Asia-Pacific index ticked up, reflecting cautious optimism despite lingering pressures from global economic uncertainty. Meanwhile, the U.S. dollar maintained its dominance, fuelled by concerns over prolonged elevated interest rates, keeping investors on edge.
Asian markets displayed mixed momentum. China’s blue-chip CSI 300 index registered a modest rise, rebounding slightly from Thursday’s sharp declines, which underscored growing concerns over its economic trajectory and potential trade friction as Donald Trump returns to the U.S. presidency. The Hang Seng Index in Hong Kong followed suit with a fractional gain. While Japan’s markets remained closed, broader Asian stocks aimed to recoup earlier losses, even as the region’s weekly performance showed a near 1% dip after a strong showing in 2024.
Across the Pacific, Wall Street saw a turbulent session. U.S. stocks initially climbed but finished broadly lower on Thursday, with Tesla losing over 6% on news of its first-ever annual delivery decline. These fluctuations underscore waning investor enthusiasm following a year-long rally in 2024, driven by optimism around AI-driven growth, anticipated Federal Reserve rate cuts, and expectations of regulatory leniency from the incoming administration.
Market sentiment has shifted as the Federal Reserve signalled fewer rate reductions than previously forecasted. This tempered outlook, combined with inflationary concerns tied to Trump’s proposed policies, has led to a rise in bond yields and a strengthening U.S. dollar, which now hovers near a two-year high. The euro and yen both struggled against the dollar’s surge, with the euro slipping to its lowest level in over two years and the yen closing 2024 with its fourth consecutive annual decline.
The U.S. economy, however, continues to show resilience. Weekly jobless claims reached an eight-month low, highlighting a robust labour market. This sets the stage for closely watched payroll and inflation data later this month, as investors assess how the Fed’s policies might evolve in the face of sustained economic strength.
Commodity markets echoed the broader optimism for growth in China, with oil prices inching upward. Brent crude and U.S. West Texas Intermediate crude both saw slight gains, reflecting hopes of stronger demand following assurances from President Xi Jinping to bolster economic activity. Gold, which had its best annual performance since 2010 in 2024, held steady, showcasing its continued appeal as a hedge in uncertain times.
In a challenging yet opportunity-rich landscape, markets across Asia and beyond remain finely balanced as 2025 unfolds.
Asian markets are navigating a challenging start to the year amidst economic uncertainties and shifting investor expectations. With a focus on resilience and recovery, the region remains a critical player in global financial trends.
Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.
