Early Asia wrap: A risk-friendly end to the week

Asian stock markets are poised to end the week on a positive note, coat-tailing Wall Street's momentum and showing minimal concern for Nvidia Corp.'s cautious revenue outlook or the upcoming US administration team.

In the cryptocurrency sector, Bitcoin hovered just shy of record peaks, with market participants on edge as they anticipate the next SEC chair appointment. The buzz around Chris Giancarlo ( aka Crypto Dad), a former Commodity Futures Trading Commission chairman known for his crypto-friendly stance, has fueled expectations of a regulatory environment more favourable to cryptocurrencies. Traders and investors are keenly watching for confirmation, hoping Giancarlo’s potential appointment would further catalyze the crypto market’s upward trajectory.

Meanwhile, geopolitical tensions added a layer of complexity to global markets. A new type of Russian missile launch into Ukraine escalated concerns, stoking the fires under commodity prices. Both oil and gold found support in the Asian trading sessions.

Back in the U.S., the race for the Treasury Secretary position is heating up with three candidates emerging as front-runners: hedge fund savant Scott Bessent, private equity mogul Marc Rowan, and the astute former Federal Reserve board member Kevin Warsh. This development has somewhat eased the anxiety in Washington as markets think either of these picks could be market-friendly. These intersecting narratives of corporate forecasts, regulatory speculations, and geopolitical maneuvers paint a vivid tableau of global financial markets' dynamic and interconnected nature.

As I wade through the deluge of 2025  bank analyses still cascading into my inbox, it's clear that the S&P 500's fate could swing dramatically—estimates range from a bullish 7500 to a bearish 4500.

So, where does that leave us? Somewhere between boundless optimism and cautious despair, which is precisely why these forecasts should always be taken with a hefty grain of salt. After all, the market rarely plays by anyone’s neatly written script.

The spectre of an Equity Risk Premium looms large over next year, especially if 10-year bond yields hurtle toward the 5% mark, propelled not by Trump’s pro-growth policies but by a darker force—rising inflation.

It's crucial to underscore that the velocity of these yield increases is what truly spooks the equities market. While stocks might endure a gentle ascent in yields if they signal robust economic growth, inflation-driven spikes are a whole different beast. A sharp, inflation-fueled rise in bond yields—particularly one that veers more than two standard deviations in any 30-day period—could spell disaster for stocks.

For now, the market might seem resilient, perhaps even invincible, but this facade could shatter dramatically. Expect a harsh and swift reckoning when the market finally confronts these rapid, inflationary yield spikes. The rug could be pulled without warning, and when it happens, the fallout could be both severe and sudden, turning market stability into a fleeting memory. In other words, markets will initially shrug off rising bond yields until they don’t.