Asia Stocks Edge Higher Amidst Geopolitical Uncertainty and US Economic Data
Asia's equity markets experienced a muted start on Monday due to the US Memorial Day holiday, while the US dollar remained pressured following a disappointing retail sales report.
Geopolitical Tensions
Talks between Russia and Ukraine are reportedly scheduled to resume in Saudi Arabia this week, keeping geopolitical tensions in focus. The inclusion of tariffs based on value-added taxes in other countries remains a concern, despite the imminent threat of reciprocal US tariffs easing until April.
Market Movements
The broader MSCI Asia-Pacific index excluding Japan advanced 0.1%, supported by gains in South Korea and Hong Kong. Japan's Nikkei index was largely unchanged.
US Economic Data
The weak US retail sales report has reignited expectations for two Federal Reserve rate cuts this year. Bond yields have rallied, pushing the 10-year Treasury yield down to 4.478%.
Dollar Weakening
The US dollar index declined 1.2% last week and remained under pressure, trading at 106.84. The euro strengthened to $1.0485, approaching resistance at $1.0533. The yen also gained against the dollar, supported by strong economic growth data.
Central Bank Meetings
Central banks in Australia and New Zealand are expected to cut interest rates this week, by 25 basis points and 50 basis points, respectively.
Commodities
Gold remained near record highs, holding around $2,879 an ounce. Oil prices declined on hopes of peace talks in Ukraine, which could lead to increased supply. Brent crude fell to $74.38, while US crude dropped to $70.32 per barrel.