Asian markets mostly fell on Monday, tracking a weak end to last week for Wall Street fueled by disappointing economic data.However, Frankfurt and the euro rose after conservatives won Germany’s closely watched election.
A healthy performance on Friday was not enough to maintain momentum in Asian markets, as investors struggled to shake off big losses in New York. The Nasdaq lost over 2% on Friday after a report showed activity in the key services sector hit a 25-month low in February. Separate data indicated consumer sentiment dived almost 10% from January, while another study revealed that expectations for inflation hit a three-decade high.
These readings follow a recent run of figures pointing to a softening of the labor market and prices continuing to rise faster than the Federal Reserve’s target rate. There have been increasing fears since Donald Trump regained the US presidency that his plans to impose import tariffs and slash taxes, immigration, and regulations would reignite inflation.
As a result, investors have reduced their expectations for the number of interest rate cuts the Fed will make this year. Hong Kong retreated after Friday’s blockbuster rally fueled by tech firms, particularly an eye-watering rise of over 14% in e-commerce titan Alibaba.
Shanghai, Seoul, Mumbai, Taipei, Manila, Jakarta, Bangkok, and Wellington were also in the red. Sydney and Singapore edged up, but the rest of the region struggled. London edged up at the open, but Paris slipped.
Frankfurt’s DAX index and the euro were boosted by news that conservatives won a closely watched election in Germany. Leader Friedrich Merz urged the speedy formation of a new coalition government. Merz’s CDU/CSU alliance won over 28% of the vote, according to projections, crushing the Social Democrats (SPD) of outgoing Chancellor Olaf Scholz, which came third.
However, there was some nervousness after the far-right Alternative for Germany (AfD) came second, almost doubling its score to over 20%. Merz said he wanted to quickly form a government, warning that as Trump is driving rapid and disruptive changes, “the world isn’t waiting for us.”
“Markets will like that, presuming it is achieved,” said National Australia Bank’s senior forex analyst Rodrigo Catril. However, SPI Asset Management’s Stephen Innes said, “With these results, the next government’s priority won’t be fixing Germany’s stagnating economy — it’ll be damage control.”
“Expect a hard pivot toward stricter immigration policies, not because of economic necessity but because mainstream parties are now in full-blown panic mode over the AfD’s rise,” Innes added.
Oil prices extended losses after dropping as much as 3% on Friday as the weak US data sparked demand fears. There are also growing expectations that Trump will ease the sanctions that have limited Russian oil exports.