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Asian Stocks Fall as Bond Yields Surge Ahead of Trump-Xi Summit 
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Asian stock markets paused on Monday after posting strong weekly gains, with thin holiday trading in China, South Korea, Taiwan, and the United States keeping activity subdued. Investors turned cautious following weak Japan GDP data and ahead of key global economic releases later this week, including U.S. fourth-quarter GDP and global manufacturing surveys.
Japan’s economy expanded just 0.1% annualized in the December quarter, sharply below the 1.6% forecast, as government spending weighed on growth. The disappointing data highlights the economic challenges facing Prime Minister Sanae Takaichi and strengthens expectations for additional fiscal stimulus. Despite the weak figures, the Nikkei index edged up 0.2%, extending last week’s 5% rally. MSCI’s Asia-Pacific index outside Japan gained 0.1%, while South Korea and Taiwan recently posted weekly surges of 8.2% and nearly 6%, respectively.
Market strategists warn that heavy investment in AI infrastructure could trigger volatility, particularly in Asian memory stocks. Concerns are mounting that if major technology firms slow capital expenditure, sectors like Korean and Taiwanese semiconductors could face sharp corrections after significant gains.
In the United States, S&P 500 futures rose 0.2% and Nasdaq futures added 0.1% as investors await Walmart earnings for insight into consumer spending trends. Defensive stocks have outperformed amid a rotation away from technology shares, pressured by soaring AI-related capex costs. Hyperscaler capital expenditure plans have climbed to $660 billion, contributing to a 7% year-on-year drop in S&P 500 share buybacks.
Bond markets attracted strong inflows as Treasury yields fell, with two-year yields closing at 3.408%, their lowest since mid-2022. Markets now price in a strong probability of a Federal Reserve rate cut by June. The U.S. dollar index slipped to 96.890, while gold eased to $5,014 per ounce and oil prices held steady, with Brent crude at $67.74 per barrel.
