Shares fell across Asia on Friday after stronger-than-expected private hiring data in the US roiled equities on Wall Street and pushed up Treasury yields.
(Bloomberg) — Shares fell across Asia on Friday after stronger-than-expected private hiring data in the US roiled equities on Wall Street and pushed up Treasury yields.
A region-wide stock gauge slid for a third day, with large declines in Australia and in Hong Kong-listed technology firms. US equity futures extended on losses seen Thursday in the S&P 500 and Nasdaq 100 benchmarks as investors turned their focus to the release of critical nonfarm payrolls numbers later in the day.
ADP Research Institute data showed US companies added the most jobs in more than a year in June, underscoring the inflationary threat from the resilient labor market.
Samsung Electronics Co. dropped in Seoul after reporting its biggest decline in quarterly revenue since at least 2009. Japanese drug maker Eisai Co. was among the biggest contributors to losses in the Topix index on concern over adoption risks for its Alzheimer’s drug, even after the medication received full approval from the Food and Drug Administration.
Treasuries extended losses in Asia with the policy sensitive two-year yield at 5%, while that on the 10-year note hovered near the highest since March. The two-year yield jumped as much as 17 basis points Thursday following the ADP report and data showing the service sector expanded in June at the fastest pace in four months.
The slide in Treasuries reverberated across Asia, with Australia’s 10-year yield climbing to the highest level since 2014, before paring the advance. New Zealand’s bond yields also jumped.
The second half of the year is set to remain volatile for bond markets, according to Robeco. “With an inverted yield curve, it’s a very hard position for bonds,” Thu Ha Chow, head of Asia fixed income at Robeco Singapore, said on Bloomberg Television.
Currencies were mixed in Asia after the Bloomberg Dollar Spot Index rose to the highest level in about four weeks Thursday. The yen was marginally stronger after rising against all its Group-of-10 peers in the prior session, supported by comments from the Bank of Japan about a “balanced” approach toward yield-curve control.
The offshore yuan traded in a narrow range after the People’s Bank of China ramped up support for the currency again through its daily fixing.
Hawkish Fed
Swap contracts linked to the Federal Reserve’s future policy decisions almost fully price in a quarter-point interest-rate hike by July 26 and show a growing likelihood of an additional move by year-end. This expectation for higher rates is reinforcing bets on tighter monetary policy globally as central banks struggle to rein in inflation.
Dallas Fed President Lorie Logan voiced her concerns on Thursday that inflation was still running too hot and more tightening was needed. Stocks have been losing ground in July after a strong first half of the year as hawkishness from central banks damps hopes of a soft landing for the global economy.
Some observers see the Fed’s 2% inflation target as potentially making matters worse for markets.
If they don’t reconsider it “in light of what’s happening in the world today, they could really cause some serious problems with both the real estate and the banking markets,” Carol Pepper, chief executive of Pepper International, said on Bloomberg Television. It’s “unrealistic” to be aiming for inflation at such a low level at this point in the cycle, she said.
Traders will be on tenterhooks for Friday’s US nonfarm payrolls and unemployment reports to see if they reinforce or reduce pressure on the Fed to raise rates soon. Economists surveyed by Bloomberg are expecting figures to moderate.
In Asia, investors were on the lookout for any stimulus decision by the Chinese government. The country is at a critical stage of economic recovery and industrial upgrading, Premier Li said during an event on Thursday. He pledged to “spare no time” in implementing a batch of targeted policies to strengthen the country’s economic recovery.
Traders in Chinese assets were also watching the meeting of US Treasury Secretary Janet Yellen and Premier Li Qiang in Beijing for any signs of improvement in the frayed trade ties of the two superpowers.
Elsewhere, oil headed for a second weekly gain after OPEC+ leaders Saudi Arabia and Russia tightened supplies and US crude stockpiles fell. Gold steadied Friday, but remained on track for a fourth consecutive weekly loss.
Key Events This Week:
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
- S&P 500 futures fell 0.1% as of 1:26 p.m. Tokyo time. The S&P 500 fell 0.8%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 fell 0.8%
- Japan’s Topix fell 0.4%
- Australia’s S&P/ASX 200 fell 1.6%
- Hong Kong’s Hang Seng fell 1%
- The Shanghai Composite fell 0.4%
- Euro Stoxx 50 futures rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0890
- The Japanese yen rose 0.1% to 143.92 per dollar
- The offshore yuan was little changed at 7.2529 per dollar
- The Australian dollar rose 0.1% to $0.6634
Cryptocurrencies
- Bitcoin fell 0.7% to $30,115.55
- Ether fell 1.5% to $1,854.77
Bonds
- The yield on 10-year Treasuries was little changed at 4.04%
- Japan’s 10-year yield advanced 3.5 basis points to 0.435%
- Australia’s 10-year yield advanced 13 basis points to 4.26%
Commodities
- West Texas Intermediate crude rose 0.4% to $72.06 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Peyton Forte, Isabelle Lee and Joanna Ossinger.
More stories like this are available on bloomberg.com
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