Asian stocks gain as hopes for year-end rally grow

Synopsis

Asian equities opened higher, mirroring gains in US stocks and fueling hopes for a year-end rally. Investors are closely watching China's loan prime rates and upcoming economic data from the UK, US, and Japan for clues on central bank policy. Meanwhile, oil prices climbed amid US actions in Venezuela, and Bitcoin and silver saw modest gains.

Asian equities opened higher, tracking Friday’s gains in US stocks that helped intensify bets for a strong finish to the year.

MSCI Inc.’s gauge of Asia Pacific shares rose 0.5%, with the tech sector leading gains. The measure capped a 1.9% weekly decline on Friday, its first in four weeks. US stock futures also advanced in early Asian trading on Monday. Elsewhere, oil climbed as US President Donald Trump intensified a blockade on Venezuela, boarding one tanker and pursuing another within weeks of first capturing a vessel. Bitcoin rose around 1% while silver hit another record high.

Hopes for a year-end rally have grown as dip buyers late last week helped equities recover from a slide driven by doubts over AI exuberance and the scope for Federal Reserve easing. US stocks jumped 0.9% on Friday in a second day of gains, wiping out the week’s loss as volumes spiked during a quarterly options and futures expiry, and as traders positioned for a rally into 2026.

“We’re now likely to see markets continue higher,” said Tony Sycamore, an analyst at IG in Sydney. “The one big elephant in the room remains the valuations in AI and where we go from here.”

Focus in Asia will be on China’s one-and five-year loan prime rates later today. Commercial banks are likely to keep lending rates unchanged for a seventh month as expectations grow that the People’s Bank of China may ease policy next year.

“A weaker economy heading into the fourth quarter has raised the urgency for more support to prevent a sharper slowdown, with year-end policy meetings hinting slightly at more monetary easing in 2026,” said Eric Zhu from Bloomberg Economics. “We see the next rate cut early next year, guiding lending rates lower.”

Chinese stocks will also be watched when markets open after Republican lawmakers in the House Select Committee on China asked the Pentagon to list more than a dozen companies as military firms.

Elsewhere, UK and US growth readings are due this week, as well as minutes from the Reserve Bank of Australia’s December policy meeting which may give clues to whether it could hike in February. In Japan, Tokyo inflation as well as national jobs data are due, helping traders assess the outlook for Bank of Japan policy after its cautious hike last week.

A gauge of the dollar edged slightly lower on Monday while Treasuries were steady. Yields on US bonds were higher on Friday as New York Fed President John Williams signaled no urgency to cut interest rates again, citing recent employment and inflation data. Cleveland Fed President Beth Hammack echoed that sentiment in an interview with the Wall Street Journal, reinforcing expectations for a pause after a string of recent reductions. Even so, traders continue to bet on two rate cuts in 2026.

“We think inflation worries voiced by some hawks on the board are overdone and overall risks in the labor market are clearly to the downside,” Citigroup Inc. strategists including Adam Pickett wrote in a note to clients. But with only one clean set of data to be published prior to next month’s meeting, “this makes current market pricing of a 30% probability of a cut in January look fair,” they wrote.

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