**Title: Asian Shares Rise as Wall Street Ends Winning Streak on Positive economic Outlook**
**Introduction**
Asian shares experienced a mostly positive trading session on Monday, following Wall Street’s eighth consecutive week of gains. Reports indicating a decline in inflation and a potential economic upturn contributed to the positive sentiment. Tokyo’s Nikkei 225, the Shanghai Composite index, the Taiex in Taiwan, and Bangkok’s SET all recorded modest gains. However, many markets in the region were closed for the Christmas holiday.
**Wall Street’s Performance**
On Friday, the S&P 500 closed 0.2 percent higher, remaining less than 1 percent below its record high set almost two years ago. The Dow slipped slightly, while the Nasdaq gained 0.2 percent. The S&P 500’s eight-week winning streak is its longest since 2017.
**Economic Reports and Treasury Yields**
Investors on Wall Street closely monitored a series of economic reports released on Friday, which resulted in fluctuations in Treasury yields. The preferred measure of inflation used by the Federal Reserve decreased to 2.6 percent in November, lower than economists’ expectations and down from 2.9 percent the previous month. This aligns with other November inflation reports released earlier in the month.
Additionally, U.S. consumer spending unexpectedly rose in November, indicating potential growth for an economy primarily driven by consumer spending. However, it also suggests that underlying inflationary pressures may persist.
Other reports revealed that orders for durable manufactured goods in November surpassed expectations, while sales of new homes unexpectedly weakened. Furthermore, sentiment among U.S. consumers improved.
**The Federal Reserve’s Balancing Act**
The Federal Reserve faces the challenge of maintaining a delicate balance between slowing down the economy through high interest rates to curb inflation without tipping it into a recession. A stronger-than-expected economy could complicate this balancing act.
The yield on the 10-year Treasury remained stable at 3.90 percent on Monday, similar to its level on Friday. However, it has significantly decreased since October when it surpassed 5 percent, causing downward pressure on the stock market.
The decline in yields has been a key factor driving the stock market’s 15 percent surge since late October. Lower yields not only encourage borrowing and stimulate the economy but also alleviate pressure on the financial system and boost investment prices. The expectation that inflation has cooled sufficiently for the Federal Reserve to cut interest rates until 2024 has contributed to this trend.
**Market Expectations**
Traders are anticipating that the Federal Reserve will reduce its main interest rate by at least 1.50 percentage points by the end of next year, according to data from CME Group. Currently, the federal funds rate sits within a range of 5.25 percent to 5.50 percent, its highest level in over two decades.
**Currency Market**
In currency dealings, the U.S. dollar weakened slightly against the Japanese yen, falling to 142.38 yen from 142.49 yen. Meanwhile, the euro strengthened against the dollar, rising to $1.1029 from $1.1019.
**Conclusion**
Asian shares started the week on a positive note, following Wall Street’s eighth consecutive week of gains. Reports indicating a decline in inflation and positive economic indicators contributed to the optimism. However, with many markets closed for the Christmas holiday, trading volumes were relatively low. Investors will continue to monitor economic data and Treasury yields for further insights into market trends and the Federal Reserve’s policy decisions.
