In Asian markets this week, U.S. payrolls and service sector data offer limited inspiration amid economic uncertainties. The S&P 500 and Nasdaq posted their worst weekly showing in months, raising concerns.

Despite the Labor Department reporting more workers hired than expected last month, the Institute for Supply Management (ISM) revealed a plunge in service sector employment to the lowest level since July 2020, sparking speculation of early 2024 rate hikes.

U.S. 10-year Treasury yield swiveled around 4%, reflecting conflicting views on economic strength, with a 13.1 bp weekly gain, the largest since mid-October. The dollar index remained little changed, while the yuan ticked higher against the dollar amidst China’s efforts to stabilize it.

China’s announcement of sanctions on five U.S. military manufacturers in response to arms sales to Taiwan raises geopolitical tensions ahead of Taiwan’s Jan. 13 elections. China frames the elections as a choice between war and peace.

Dollar/yen ended Friday with a fractional 0.02% gain, extending its 2024 winning streak to four days. Bank of Japan Governor Kazuo Ueda faces pressure to end Japan’s negative interest rate policy, aggravated by last week’s earthquake.

Key developments this week include Tokyo CPI on Monday (December), Japan household spending on Monday (December), and South Korea’s unemployment rate on Tuesday (December). Other significant CPI reports include Australia on Tuesday, China on Thursday, India on Friday, and the highly anticipated U.S. release on Thursday.

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Conclusion:

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FAQs:

Q: How did the ambiguous economic and Fed policy impact Asian markets this week?

A: Despite U.S. payrolls data, uncertainties and speculation dampened market enthusiasm in the region.

Q: What triggered the speculation of early 2024 rate hikes?

A: The Institute for Supply Management (ISM) reported a significant plunge in service sector employment.

Q: How did China respond to U.S. arms sales to Taiwan ahead of the elections?

A: China announced sanctions on five U.S. military manufacturers, heightening geopolitical tensions.

Q: What are the key developments to watch in the upcoming week?

A: Keep an eye on Tokyo CPI, Japan household spending, and South Korea’s unemployment rate.