A gauge of Asian equities was led lower by a drop in technology stocks as investors weighed weak factory data against inflation concerns from OPEC+’s plan to cut oil output. The Australian dollar fell after the central bank paused rate hikes.
(Bloomberg) — A gauge of Asian equities was led lower by a drop in technology stocks as investors weighed weak factory data against inflation concerns from OPEC+’s plan to cut oil output. The Australian dollar fell after the central bank paused rate hikes.
A benchmark of the region’s shares was down around 0.2%, with notable weakness in Hong Kong and Alibaba Group Holding Ltd. one of the biggest contributors to the decline there. Contracts for US indexes retreated slightly following a mixed session on Wall Street.
Shares in Australia rose slightly and the nation’s currency weakened following the Reserve Bank of Australia’s decision to pause its most aggressive tightening cycle since 1989, although it said more tightening may be needed. Government bond yields extended their declines, with both the three-year and 10-year maturities down more than six basis points.
A gauge of greenback strength was up after a 0.4% decline Monday and Treasuries steadied after being at the center of the action in the US hours. Policy-sensitive two-year yields reversed gains of as much as 11 basis points Monday and ended six basis points lower after a measure of US factory activity contracted by more than expected. That came after figures earlier in the day showed China’s manufacturing activity unexpectedly eased.
While such data is tempering inflation concerns despite expected energy hikes after the cartel’s production cut, it also shows the darkening economic outlook is spreading to Asia.
In the US, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg Television that OPEC+’s decision to cut output was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging. “Whether it will have a lasting impact I think is an open question,” he said.
As the possibility of a recession looks more likely, the upcoming earnings season may be the first of challenging quarters.
JPMorgan Chase & Co. strategist Marko Kolanovic reiterated the bank’s underweight call on equities in a note to clients, warning that “stocks are set to weaken for the remainder of the year” as headwinds from banking turbulence, oil shocks, and slowing growth linger.
Meanwhile, the Hong Kong Monetary Authority bought the local dollar for the first time since mid-February after the currency slid past the weak end of its trading band. South Korean inflation eased more than expected in March, reducing pressure on the central bank to resume policy tightening.
Further into the week, the US government’s monthly employment report will be released Friday and will give a fuller picture of the job market. Swaps linked to Fed interest-rate expectations showed a quarter-point hike in May as more likely than not.
“This notion that central banks are about to turn dovish quite soon, that notion is a bit premature given that we still have commodity prices that may go higher and makes it difficult for central banks,” Moh Siong Sim, a currency strategist at Bank of Singapore, said on Bloomberg Television.
In commodities, West Texas Intermediate advanced toward $81 a barrel and Brent moved past $85 after both rallied more than 6% on Monday. Gold traded lower.
Key events this week:
- Eurozone PPI, Tuesday
- US factory orders, US durable goods, Tuesday
- Cleveland Fed President Loretta Mester speaks, Tuesday
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US trade, Wednesday
- UBS annual general meeting, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 1:35 p.m. Tokyo time. The S&P 500 rose 0.4%
- Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.3%
- Japan’s Topix index rose 0.1%
- Hong Kong’s Hang Seng Index fell 0.6%
- China’s Shanghai Composite Index rose 0.2%
- Australia’s S&P/ASX 200 Index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0889
- The Japanese yen fell 0.3% to 132.87 per dollar
- The offshore yuan fell 0.2% to 6.8895 per dollar
- The Australian dollar fell 0.3% to $0.6767
Cryptocurrencies
- Bitcoin rose 0.8% to $27,813.37
- Ether rose 1.4% to $1,805.95
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.42%
- Japan’s 10-year yield advanced one basis point to 0.375%
- Australia’s 10-year yield declined six basis points to 3.26%
Commodities
- West Texas Intermediate crude rose 0.5% to $80.79 a barrel
- Spot gold fell 0.3% to $1,978.56 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth and Jason Scott.
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