(Bloomberg) — Asian shares fell early Monday as traders reined in expectations of Federal Reserve rate cuts following fresh signs of economic resilience in the U.S.
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Japanese and Australian shares fell. The South Korean benchmark bucked the trend, led by Samsung Electronics Co.’s rally. after the company announced a share buyback plan. U.S. futures rose after the S&P 500 fell 1.3% on Friday, erasing more than half of its gains from the U.S. election.
A soft start threatens to extend last week’s global sell-off as investors weigh the prospect that Donald Trump’s tariffs and tax cuts could potentially reignite inflation in an already robust U.S. economy. A report on U.S. retail sales on Friday that included major upward revisions also helped fuel expectations that the Fed could pause its easing cycle in 2025, with the chance of a rate cut next month now seen as less than a toss-up.
“Another Fed cut is still likely in December, but it is now a close call,” wrote Shane Oliver, chief economist at AMP Ltd. in Sydney, in a note to customers. “A slower pace of easing is likely next year, especially given that Trump’s policies on tariffs and more tax cuts pose some upside threats to inflation over a one- to three-year horizon.”
The dollar was slightly weaker after rising 1.4% last week, a seventh straight weekly gain as Treasury yields rose on reduced expectations for Fed policy. These moves, coupled with concerns about Chinese growth, have devastated everything from the Australian dollar to emerging market bonds. Asian shares fell 3.9% last week, the worst sell-off in about six months.
In terms of commodities, oil saw a weekly decline due to concerns about abundant supply and weaker demand from the largest crude importer, China. Ukraine’s allies urge Volodymyr Zelensky to consider new ways to end the war with Russia, while the US considers a final decision to lift some restrictions on Western weapons to attack limited military targets in Russia .
Later on Monday, traders will watch a speech and media briefing by Bank of Japan Governor Kazuo Ueda for clues on the central bank’s next policy move after officials expressed concerns about the yen’s rapid weakening.
“Ueda’s press conference should be the biggest focus this week in determining the timing of the BoJ’s next rate hike,” Barclays strategists led by Themistoklis Fiotakis wrote in a note to clients. “USD/JPY could remain under upside pressure in the near term due to Trump’s carry trades and the yen, but is likely to rise more slowly as the rate approaches 160 due to currency intervention and positioning concerns for faster interest rate increases.”