Asian markets opened in negative territory on Thursday, reacting to renewed concerns over the US fiscal outlook and global investor caution. The Nikkei 225 fell over 300 points in Tokyo, while Hong Kong’s Hang Seng Index shed 0.3%, echoing Wall Street’s losses overnight and highlighting growing anxiety over rising interest rates and budget uncertainty in the world’s largest economy.
The declines followed a sharp drop in US equities, where the S&P 500 lost 1.6%, the Dow Jones fell nearly 2%, and the tech-heavy Nasdaq slid by 1.4%. A rise in Treasury yields and fears surrounding a potential surge in the US budget deficit, prompted by renewed political debate over tax cuts, triggered widespread risk aversion. Investors are now reassessing growth prospects in light of potential fiscal instability and the Federal Reserve’s cautious stance on rate reductions.
Across the Asia-Pacific region, sentiment was subdued. South Korea’s Kospi slipped marginally, and Australia’s ASX 200 also posted minor losses, with energy stocks underperforming due to falling crude prices. Oil markets have weakened amid signs of rising US inventories and fading demand expectations. Brent crude is currently trading below $65 per barrel, with West Texas Intermediate dipping close to $61, adding further pressure on commodity-linked equities.
In Europe, early indicators point to a mixed and tentative start. Futures suggest the major indices may open flat or slightly lower, as traders digest the overnight losses in the US and look ahead to fresh economic data. While the STOXX 600 has recently hovered near two-month highs, momentum is fragile. Investors remain cautious ahead of flash Purchasing Managers’ Index (PMI) readings due later in the day, which are expected to provide a clearer picture of the eurozone’s economic trajectory.
Policymakers in Europe have signalled a willingness to maintain accommodative fiscal policies, but concerns about stagnant growth persist. The European Commission recently forecast 1.1% GDP growth across the bloc for 2025, reflecting limited confidence in a swift recovery.
US markets are also expected to open lower later today, as investor sentiment continues to wobble. Futures for all three major indices were in the red during the European morning session. Corporate earnings will play a key role in determining direction, with results expected from several high-profile firms, including TD Bank, Analog Devices and Ralph Lauren. Analysts will be watching closely for signals on consumer health and business resilience amid the uncertain economic backdrop.
Meanwhile, currency markets have shown modest movement, with the dollar holding firm against major peers, reflecting its safe-haven appeal during bouts of market stress. The yen and Swiss franc also saw modest inflows as investors adjusted risk exposures.
Looking ahead, market volatility is likely to persist throughout the trading day. With little in the way of major policy announcements expected, investor attention will remain focused on macroeconomic data and company earnings for clues about the direction of global growth. As the week draws to a close, positioning ahead of the weekend and month-end flows may also introduce additional swings in sentiment.
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