Most Asian shares declined Monday as traders assessed a mixed US jobs report for clues on the Federal Reserve’s next decision. The intensifying Ukraine-Russia conflict also weighed on sentiment.
(Bloomberg) — Most Asian shares declined Monday as traders assessed a mixed US jobs report for clues on the Federal Reserve’s next decision. The intensifying Ukraine-Russia conflict also weighed on sentiment.
Equity gauges fell in mainland China, South Korea and Australia. Chinese pharmaceutical stocks were among the worst performers in the nation on reports of a widening anti-bribery campaign in the health sector. US equity futures gained in Asian trading after the S&P 500 ended 0.5% lower Friday as Apple Inc. dropped almost 5% after its outlook sparked worries over tepid demand. By contrast, Amazon.com Inc. climbed over 8% on a bullish revenue forecast.
Oil was steady after Ukraine attacked another Russian vessel over the weekend, a signal of a rapidly expanding war that puts at risk significant flows of Russia’s commodities from the Black Sea. Wheat also extended its advance.
Treasury yields advanced in Asian trading hours, reversing some of Friday’s declines when the interest-rate sensitive two-year yields and the 10 year fell more than 10 basis points after US payrolls came in below estimates. But, the data also showed wages topping forecasts and lower unemployment.
Friday’s decline wrapped up a week when long duration Treasuries were sold off on concern of expanded US debt issuances. The 10-year yield still ended the week eight basis points higher.
A scenario of a continued rise in the 10-year yields, especially with the release of US CPI data this week, may present a near-term headwind for Asian stocks, according strategists at Nomura Holdings Inc.
Still, “we do not expect a lasting follow through on Asian stocks and thus we are of the view that this pullback in stocks is likely just a speed bump,” the strategists, including Chetan Seth, wrote in a note.
The greenback weakened against some of its Group-of-10 counterparts after the US currency slid Friday amid a debate among Fed officials on whether additional interest-rate hikes are needed.
Fed Talk
Swap traders projected about a 40% chance of another quarter-point rate increase by the Fed by the end of this year. By the end of 2024, they projected rate cuts totaling more than 125 basis points.
Fed officials Raphael Bostic and Austan Goolsbee suggested that slower US employment gains mean the central bank may soon need to pivot to thinking about how long to hold rates at elevated levels. Their colleague Michelle Bowman said the Fed may need to raise rates further in order to fully restore price stability.
However, Fed doves may be too confident about the strength of the US economy and an easing in price pressures, according to Win Thin, head of currency strategy at Brown Brothers Harriman & Co. “The easy part is getting from 8% to 4%; the hard part is getting it from 4% to 2%,” he said about US inflation in a note. “Because of this, we believe the markets continue to underestimate the Fed’s capacity to tighten.”
The yen edged lower after strengthening about 0.6% Friday. A summary of opinions from the Bank of Japan’s July meeting showed that one member said the central bank should allow greater flexibility in yield curve control. Yields on Japanese 10-year bonds fell one-and-a-half basis points, tracking the decline in Treasuries.
Key events this week:
- Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman at Fed Listens event, Monday
- Japan household spending, Tuesday
- US wholesale inventories, trade, Tuesday
- Philadelphia Fed President Patrick Harker speaks, Tuesday
- China CPI, PPI, Wednesday
- India rate decision, Thursday
- US initial jobless claims, CPI, Thursday
- Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
- UK industrial production, GDP, Friday
- US University of Michigan consumer sentiment, PPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.4% as of 12:03 p.m. Tokyo time. The S&P 500 fell 0.5% Friday
- Nasdaq 100 futures rose 0.5%. The Nasdaq 100 fell 0.5%
- Japan’s Topix rose 0.3%
- Australia’s S&P/ASX 200 fell 0.3%
- Hong Kong’s Hang Seng was little changed
- The Shanghai Composite fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1000
- The Japanese yen fell 0.2% to 142.02 per dollar
- The offshore yuan fell 0.1% to 7.1971 per dollar
- The Australian dollar rose 0.3% to $0.6591
Cryptocurrencies
- Bitcoin rose 0.2% to $29,152.5
- Ether rose 0.7% to $1,842.72
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.06%
- Japan’s 10-year yield declined 1.5 basis points to 0.625%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller and Ishika Mookerjee.
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