Exciting Times in the Asian Stock Markets: Interest Rate Hikes and Market Turmoil

The Asian stock markets start the week with caution as rising bond yields challenge stock valuations, particularly in the highly valued technology sector. At the same time, a series of important central bank meetings and significant economic data are looming, which continue to create tension. Recent figures from China show that retail sales in November rose by only 3.0% compared to the previous year, significantly below market forecasts of 4.6%. This underscores the need for significantly more aggressive stimulus measures. While industrial production met expectations, property prices continued to decline, albeit more slowly. China's blue-chip index fell by 0.2% after dropping more than 2% last Friday. However, over the weekend, central bank officials signaled that there is room for further reductions in reserve requirement ratios, although previous easing measures have had little impact on credit demand. This week, interest rates in the US and Sweden are expected to fall, while in Japan, the UK, and Norway they remain stable. The US Federal Reserve plays a central role with a high probability of 96% that key interest rates will be cut by 25 basis points. More important, however, will be the future interest rate strategy, particularly the Fed's "Dot Plot". Michael Feroli, an economist at JPMorgan, expects forecasts for future interest rate cuts to be revised downward, indicating uncertainties in trade and economic policy in the coming year. Investors have since scaled back their expectations for interest rate cuts, also in light of solid economic data and speculation that President-elect Donald Trump's plans for tax cuts and tariffs could lead to an increase in national debt. The rise in yields led to severe losses in the US Treasury market last week. Yields on 10-year government bonds rose to 4.39% and threaten to exceed a key bearish target of 4.50%, making bonds more attractive than stocks and potentially increasing the cost of capital for companies.