Asian Stocks Slide as Investors Cut Risk Ahead of Central Bank Decisions and Key Data

BY COMFORT OGBONNA

Asian equities fell sharply in early trading on Monday as investors dialed back risk exposure at the start of a pivotal week packed with major central bank meetings and long-awaited economic data releases. With the year drawing to a close and liquidity expected to thin, markets showed signs of caution after a strong run in several regional bourses.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped about 1%, weighed down by a steep decline in South Korean equities, which slid as much as 2.7%. The pullback came despite South Korea being among the world’s best-performing equity markets this year, underscoring a broader shift toward profit-taking and defensive positioning as investors prepare to close their books for the year.

Market participants noted that trading conditions are likely to become increasingly subdued as the final full week of the year unfolds. Many investors have already reduced exposure, while others are expected to follow suit, contributing to thinner liquidity. Although markets may still be able to absorb moderate trading volumes without excessive price swings, activity is widely expected to fall off sharply as the holiday period approaches.

In U.S. markets, S&P 500 e-mini futures edged up 0.3%, offering limited support to sentiment. Meanwhile, the yield on the benchmark 10-year U.S. Treasury note slipped by 1.2 basis points to 4.182%, reflecting cautious positioning ahead of a busy calendar of economic releases and monetary policy decisions.

Several major central banks are set to announce policy decisions this week, adding to market uncertainty. The Bank of Japan is widely expected to raise interest rates by 25 basis points to 0.75%, a move that would further signal its gradual shift away from ultra-loose monetary policy. In contrast, the Bank of England is expected to cut rates by a similar margin to 3.75% as it grapples with slowing growth. The European Central Bank is anticipated to keep rates unchanged, a stance also expected from Sweden’s Riksbank and Norway’s Norges Bank.

Investors will also turn their attention to a batch of U.S. economic data that was delayed by the recent government shutdown. This includes the closely watched November jobs report and the monthly consumer price index, both of which could influence expectations around the future path of U.S. interest rates.

In currency markets, the U.S. dollar held firm against the offshore Chinese yuan, trading at around 7.0532 and hovering near its strongest level in more than a year. The resilience of the dollar followed signs of further slowing in China’s economy, after data showed factory output and retail sales growth weakened again in November.

Additional pressure came from China’s troubled property sector. Official figures released on Monday showed new home prices continued to fall in November, highlighting the difficulty authorities face in reviving demand despite repeated pledges to stabilize the sector. State-backed developer China Vanke said it would convene a second bondholder meeting after failing to secure approval to extend a bond payment due on Monday, raising the risk of a potential default and reigniting concerns about broader contagion in the property market. Analysts warned that a default by a company long viewed as relatively safe could significantly undermine confidence and shift investor focus toward balance sheet strength and the government’s willingness to provide support.

Japanese equities also declined, even as sentiment data offered a more upbeat view of the domestic economy. The Bank of Japan’s closely watched tankan survey showed that business confidence among large manufacturers rose to a four-year high, suggesting resilience in the face of higher U.S. tariffs. Nevertheless, the Nikkei 225 fell about 1.4%, tracking the broader regional downturn.

In commodity markets, oil prices moved higher, with Brent crude rising 0.6% to $61.46 a barrel. Prices were supported by concerns over potential supply disruptions stemming from U.S.-Venezuela tensions and other geopolitical risks. In Canada, Imperial Oil said it had issued a fire alert at its 120,000-barrel-per-day refinery in Ontario, while Russian officials reported that an oil refinery in Afipsky was not damaged following a Ukrainian drone attack.

Geopolitical developments also remained in focus, with U.S. envoy Steve Witkoff saying significant progress had been made during peace talks aimed at ending the war in Ukraine, held in Berlin on Sunday.

Safe-haven assets continued to attract demand, with gold extending its rally for a fifth straight session. Spot gold rose 0.5% to $4,325.51 an ounce, moving closer to a record high of $4,381.21. Cryptocurrency markets also showed signs of stabilization after recent losses, as bitcoin gained 1.2% to trade around $89,517, while ether rose 1.1% to $3,116, snapping a three-day losing streak.