Global Markets Begin December Unevenly as Japan’s Weak Factory Data Triggers Nikkei Slump, Oil Surges

Gerik

Summary:

Asian markets opened December on mixed footing, with Japan’s Nikkei down nearly 2% amid weak corporate investment and factory activity, while oil prices jumped over $1 a barrel and U.S. futures declined....

Diverging Asian Market Sentiment Amid Weak Factory Reports

Asian stock markets entered December with no clear consensus, as investors absorbed new regional manufacturing data and shifting U.S. economic signals. Japan's Nikkei 225 plummeted by 1.9% to 49,285.66 after government data revealed disappointing corporate investment and ongoing manufacturing contraction. The S&P Global Japan Manufacturing PMI came in at 48.7 for November, slightly higher than October’s 48.2 but still firmly in contractionary territory. This marked the fifth consecutive month of decline, reinforcing the persistent weakness in Japan’s manufacturing base.

The subdued PMI data indicates that Japanese manufacturers are still struggling with fragile demand. According to S&P Global’s Annabel Fiddes, firms saw a “solid decline in new business,” revealing a strong relationship between faltering demand conditions and reduced factory output. This downward momentum aligns with the broader regional narrative of cooling production despite improving exports.

China’s Manufacturing and Trade Frictions Shape Sentiment

China’s own factory sector fared no better. Its official PMI data released over the weekend confirmed an eighth straight month of contraction in November, amplifying concerns about the country’s growth trajectory even as it continues a temporary trade truce with the U.S. The persistence of sub-50 readings across East Asia suggests that supply chain activity remains hindered, likely influenced by geopolitical pressures, weak internal consumption, and volatile global demand.

Despite this weakness, Hong Kong’s Hang Seng Index defied the trend and rose 0.8% to 26,068.05. In contrast, Shanghai’s Composite Index posted a smaller gain of 0.4%, while South Korea’s Kospi remained largely flat at 3,926.20. Australia’s ASX 200 declined 0.3%, and Taiwan’s Taiex lost 0.5%. India’s Sensex edged up by 0.3%, reflecting domestic optimism likely buoyed by retail trends.

Oil Prices Climb Sharply As Supply Concerns Resurface

Commodities offered a more bullish picture, with both U.S. benchmark crude and Brent crude rising $1.05 per barrel in early Monday trading. The price rise could be attributed to new supply constraints or geopolitical anxieties, although specifics were not detailed. This movement in oil markets may exert inflationary pressures if sustained, which would complicate central bank policy decisions heading into 2026.

U.S. futures were lower early Monday, with S&P 500 contracts down by nearly 0.7% and Dow futures falling 0.4%. This decline followed a Friday session marred by trading halts on major indices due to a data center outage at CME’s CyrusOne facility. Despite the glitch, the S&P 500 had closed 0.5% higher, the Dow rose 0.6%, and the Nasdaq gained 0.7% in the shortened post-Thanksgiving trading day.

Investors are still digesting signals from the Federal Reserve, which has already implemented two rate cuts in 2025 to counter a weakening job market. However, policymakers face a dilemma: while rate cuts could support economic activity, they also risk reigniting inflation, especially amid rising energy prices. According to the Fed’s October meeting minutes, internal divisions are deepening over the appropriate course of action.

Tech Sector Divergence Reflects Shifting Investor Sentiment

November saw wide variance in tech sector performance. While Nvidia dropped 1.8% on Friday and posted a double-digit monthly loss, other names like Oracle and Palantir fell 23% and 16% respectively during the month. On the other hand, Alphabet surged nearly 14% as enthusiasm grew over its Gemini AI release, showing how investor interest in artificial intelligence remains selective and volatile.

This dispersion indicates a correlation between tangible product rollouts and investor confidence, while companies without immediate breakthroughs may face stiffer selloffs. As AI-driven optimism remains a key theme, market momentum will likely continue to pivot around these announcements.

Retail and Consumer Spending Show Resilience Amid Uncertainty

The holiday shopping season added another layer to market dynamics. Early signals suggested stronger-than-expected consumer activity during Black Friday and Cyber Monday. This optimism, however, is counterbalanced by concerns over long-term U.S. economic health, employment softness, and monetary tightening.

Retail stocks reacted cautiously. Macy’s dipped 0.3%, Kohl’s rose 1.4%, and Dick’s Sporting Goods dropped 0.5%. Meanwhile, Abercrombie & Fitch climbed 2.9%, and American Eagle Outfitters gained 0.7%, hinting at mixed performance among specialty retailers.

Currency And Crypto Markets Reflect Cautious Mood

Currency markets were relatively subdued. The dollar slipped to 155.57 yen from 156.14, while the euro inched up to $1.1602. Bitcoin, however, experienced notable volatility, dropping 5.3% to $86,225. This sharp decline reflects speculative concerns amid broader risk-off sentiment in global markets.

The first trading day of December highlighted growing divergences across global markets. Asia’s manufacturing weakness, a lack of broad-based recovery in China, and uncertainties in Fed policy continue to constrain bullish momentum. Oil price gains and resilient retail spending offer short-term optimism, but the overall landscape remains fragile. Investors are likely to remain cautious ahead of key policy meetings and year-end economic data, with risk appetite sensitive to both geopolitical developments and macroeconomic signals.

Source: AP

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