Asian equities slid on Tuesday and the dollar hovered near two-month lows as investors turned cautious ahead of key U.S. economic data, including jobs figures that could shape expectations for Federal Reserve policy next year.
The risk-off mood weighed on speculative assets, with bitcoin easing 0.3% to $86,017.67 after hitting a two-week low in the previous session. Nasdaq futures dropped 0.8%, while European futures fell 0.5%.
Technology stocks led declines across Asia. South Korea’s KOSPI sank 1.8%, Taiwan’s benchmark index fell 0.8%, and Hong Kong’s Hang Seng Tech Index slid 2.7%. As a result, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.45%, its lowest level in three weeks.
Investors are focused on combined U.S. employment reports for October and November due later on Tuesday, as well as Thursday’s inflation data. However, some details will be missing after the longest government shutdown in U.S. history disrupted data collection.
“With key jobs data ahead, investors don’t want to be caught long crowded, long-duration trades if rates reprice higher. That’s why tech is the first domino,” said Charu Chanana, chief investment strategist at Saxo.
The Federal Reserve cut interest rates last week as expected and projected one additional cut in 2026. Markets, however, are pricing in at least two cuts next year, underscoring the importance of upcoming data.
“If the data is mixed to slightly softer, the soft-landing narrative stays intact, but it may not spark a strong risk-on rally,” Chanana said. “The real risk is a hawkish surprise—hotter inflation or jobs data could push yields higher and hit long-duration growth assets first.”
Speculation has also grown over who may succeed Fed Chair Jerome Powell when his term ends in May, with expectations of a more dovish successor boosting bets on rate cuts.
Central Bank Bonanza
Attention this week also turns to policy decisions from the Bank of England, the European Central Bank, and the Bank of Japan. Markets expect the BoE to cut rates, the BOJ to hike, and the ECB to hold steady, though debate continues over whether Europe could see a rate hike next year.
In currency markets, the euro held near $1.1751 after touching its highest level since early October, while sterling edged down to $1.3368. The dollar index was little changed at 98.295, lingering near its lowest in almost two months.
The Japanese yen strengthened to 155.07 per dollar ahead of the BOJ’s decision on Friday, with markets largely pricing in a rate hike. Focus will be on guidance for 2026.
“The reaction will hinge on the nuances of the BOJ’s communication,” said Gregor Hirt, global CIO for multi-asset at Allianz Global Investors. “If Governor Kazuo Ueda stresses data dependence and avoids signalling further hikes, markets may see that as cautious or even dovish.”
Commodities Slide
Oil prices declined as traders weighed the potential impact of a Russia-Ukraine peace deal. Brent crude fell 0.54% to $60.23 a barrel, while U.S. West Texas Intermediate dropped 0.6% to $56.48. Both benchmarks lost more than 4% last week amid expectations of a global oil surplus in 2026.
Gold also retreated, falling about 0.6% to $4,275.41 an ounce, slipping below the eight-week highs seen last week.
