Asia Markets Slip as December Opens, Hit by China Factory Weakness and Fed Rate-Cut Bets

Asia-Pacific markets opened December on a weaker note Monday as investors reacted to a surprise contraction in China’s factory activity and rising expectations of a U.S. Federal Reserve rate cut later this month. Traders are now pricing in an 87% chance of a quarter-point cut at the Fed’s December 10 meeting, according to CME’s FedWatch Tool.

Hong Kong’s Hang Seng Index opened slightly lower before stabilising, while the CSI 300 in mainland China edged higher. Fresh data showed China’s private RatingDog Manufacturing PMI fell to 49.9 in November, missing expectations and signalling contraction. The reading follows official figures released Sunday that also showed an eighth straight month of shrinking factory activity, with services weakening as earlier holiday momentum faded.

Hong Kong financial stocks with crypto exposure slumped after the People’s Bank of China warned of illegal digital-currency activity. Shares of Yunfeng Financial and Bright Smart Securities dropped more than 7%, while Guotai Junan also declined.

Japan’s Nikkei 225 fell sharply, losing more than 1%, while the broader Topix also retreated. Electrical equipment maker Fujikura, Sumitomo Pharma and chip-testing firm Advantest were among the biggest decliners. South Korea’s Kospi dipped modestly, though the small-cap Kosdaq outperformed with gains above 1%. Australia’s ASX 200 also traded lower.

U.S. equity futures were mostly flat in early Asian hours following a shortened post-Thanksgiving session that saw the Nasdaq Composite log its fifth straight day of gains. The S&P 500 and Dow Jones Industrial Average also ended higher, setting the tone for a cautious start to the final month of the year.