Asian markets traded cautiously on Monday amid reduced liquidity from the Lunar New Year holiday and fresh economic data from Japan that highlighted persistent growth challenges.
Trading was suspended in Shanghai, Seoul, and Taipei for the extended holiday, while Hong Kong and Singapore ended their sessions early. U.S. markets were also closed for Presidents’ Day.
Japan’s economy grew a mere 0.1% in the final quarter of 2025, falling well short of the 0.4% forecast. The underwhelming performance puts pressure on Prime Minister Sanae Takaichi, who secured a landslide victory in early February on a platform of economic revival. Analysts noted the results indicate a recent supplementary budget has yet to stimulate public spending. “Sluggish economic activity increases the chances that Takaichi will not only press ahead with suspending the sales tax on food but enact a supplementary budget during the first half of the fiscal year that starts in April already rather than wait until the end of this year,” said Marcel Thieliant of Capital Economics.
The Nikkei 225 closed 0.2% lower. Among other regional markets, Hong Kong rose 0.5% in its shortened session, while Wellington, Jakarta, Manila, and Kuala Lumpur saw marginal losses. Sydney, Mumbai, and Bangkok posted gains, and Singapore was little changed.
The market tone showed signs of stabilising after a tech-driven sell-off last week, sparked by concerns over the massive investments in artificial intelligence infrastructure and the timeline for returns. Attention now turns to the five-day AI Impact Summit in New Delhi, starting Monday, with industry leaders like OpenAI’s Sam Altman and Google’s Sundar Pichai scheduled to speak. While generative AI has boosted tech profits, growing anxiety about its societal and environmental risks is influencing investor sentiment.
This calm followed a positive reaction to U.S. data on Friday. Consumer inflation in January cooled more than expected, with the core measure dropping to 2.4%, its lowest since March 2021. “US inflation data was good. And the initial response in equities reflected that. But the devil was in the details,” noted Kyle Rodda of Capital.com, adding that sustained improvement is needed for the Federal Reserve to resume rate cuts. Markets have priced in a higher probability of deeper cuts, supporting gold prices after a dip below $5,000 an ounce. Standard Chartered stated, “We expect gold to remain well-supported.”
Key market movements at approximately 0710 GMT showed the Dow Jones Industrial Average up 0.1% and London’s FTSE 100 up 0.4% from Friday’s close. The dollar strengthened slightly against the yen to 153.14, while other major currency pairs were flat. Oil prices held steady, with Brent crude at $67.75 per barrel.
The week ahead will be dominated by the AI summit’s discussions on technology governance and economic policy signals from major central banks, as investors seek clarity on growth trajectories and the path of monetary policy.
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