Asian Stocks Experience Volatility, Set for Strongest Month in Three Years

Market Overview and Key Drivers

By Gregor Stuart Hunter

U.S. Government Shutdown Impact

SINGAPORE, Jan 30 (Reuters) - Stocks were volatile in early Asian trading on Friday after U.S. President Donald Trump endorsed a bipartisan deal to avert a fresh government shutdown and said he has decided who he will nominate to lead the Federal Reserve.

Performance of Major Companies

MSCI's broadest index of Asia-Pacific shares outside Japan fluctuated between gains and losses and was recently down 0.2%, extending the previous day's declines as it headed for its best monthly performance in more than three years.

Cryptocurrency Trends

S&P 500 e-mini futures slid 0.4% and Nasdaq e-mini futures were off 0.5%, while precious metals were choppy after a flash crash.

"Progress toward averting a shutdown would reinforce U.S. yields and the dollar, while heightened shutdown risk would shift markets to headline-driven moves amid possible data delays," said Shoki Omori, chief desk strategist for rates and FX at Mizuho in Tokyo. On Thursday, Wall Street stocks fell after lacklustre earnings from Microsoft raised fears about whether its bets on artificial intelligence would pay off. The S&P 500 closed down 0.1% and the Nasdaq Composite tumbled 0.7%. "There was plenty of drama in the markets," analysts from Westpac wrote in a research report. "Sentiment shifted during U.S. trading hours when concerns about equity valuations in the technology sector resurfaced." With just under a third of S&P 500 companies having reported, 76% of companies have beaten earnings estimates. But earnings season has thus far been a mixed bag for the major U.S. tech firms that dominate the index.

Microsoft's shares dropped 10% on Thursday, shredding more than $350 billion in market value after its cloud business failed to impress, while Meta gained 10% as its AI investments bolstered ad targeting, aiding a rosy first-quarter forecast. Meanwhile, Apple on Thursday forecast a surge of up to 16% in revenue for the March quarter, well ahead of Wall Street's expectations, powered by strong demand for its iPhones and a sharp rebound in China. In Japan, the Nikkei 225 was flat after data on Friday showed that core consumer prices in Tokyo rose 2.0% in January from a year earlier, slowing from the previous month but matching the Bank of Japan's target, easing pressure on the central bank. The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was last up 0.3% at 96.441 after Trump said he would unveil his pick to replace Federal Reserve Chair Jerome Powell on Friday.

On prediction market site Polymarket, the implied probability of contracts betting that Trump will nominate former Fed Governor Kevin Warsh to lead the central bank surged to 88%. The yield on the U.S. 10-year Treasury bond was last up 3.8 basis points at 4.263%. Fed funds futures are pricing an implied 86.6% probability that the U.S. central bank will hold steady on rates at its next two-day meeting on March 18, compared with a 87.5% chance a day earlier, according to the CME Group's FedWatch tool.A faltering rebound for precious metals fell short after a choppy session on Thursday. Gold was last down 0.7% at $5,357.9404, while silver slipped 0.2% to $115.89."The liquidation of what had become some grossly extended positioning ... is not overly surprising, particularly in the precious metals space," said Chris Weston, head of research at Pepperstone Group in Melbourne. WTI crude was last down 0.7% at $64.95 as oil markets weighed geopolitical risks, after Trump on Thursday signed an executive order declaring a national emergency and establishing a process to impose tariffs on goods from countries that sell or provide oil to Cuba.

Also Thursday, Trump said he was planning to talk to Iran amid rising tensions. Bitcoin was last down 2.0% at $82,684.51, while ether= was last down 1.7% at $2,768.01.

(Reporting by Gregor Stuart Hunter; Editing by Thomas Derpinghaus)