(Bloomberg) — Stocks and bonds slid in Asia following Friday’s stronger-than-expected US jobs data, while oil climbed to a four-month high as a fresh wave of American sanctions on Russia threatened to crimp supplies.
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MSCI’s index of regional equities slipped for a fourth day as the US payroll numbers damped bets on further Federal Reserve interest-rate cuts. US equity futures pointed to further losses on Wall Street after the S&P 500 fell 1.5% on Friday. Japanese markets are shut for a holiday, meaning there’s no trading in cash Treasuries in Asia.
The downward pressure in Asia markets is tied to Friday’s payrolls data, said Lynn Song, chief greater China economist at ING Bank NV. “Hawkish developments from the US jobs data also adds extra pressure on emerging markets, as markets have gone from pricing in three-to-four cuts prior to Trump’s election victory to just one cut now.”
The MSCI Asia Pacific Index dropped as much as 1.1%, with benchmarks in Hong Kong, Taiwan and South Korea leading declines among major regional markets.
Chinese shares extended losses even after local data showed exports rose to a record last year. This may be one of the last high points for the country’s trade, with US President-elect Donald Trump promising to impose even higher tariffs on Chinese goods when he takes office next week.
Any recovery in China stocks “is predicated upon further policy announcements,” Stephanie Leung, chief investment officer of Stashaway, said on Bloomberg Television. What investors are looking for are “more pro-consumer, pro-consumption policies coming out from China,” she said.
Brent crude climbed above $81 a barrel, after surging almost 4% Friday. That was after the US imposed its most aggressive and ambitious sanctions yet on Russia’s oil industry, targeting two large exporters, insurance companies, and more than 150 tankers. The jump in oil prices is set to provide an extra challenge for central bankers, including the Fed, if it leads to stickier inflation.
Bonds Decline
Bonds dropped in Asia following last week’s Treasury declines. Australian 10-year yields climbed as much as 12 basis points to 4.66%, while New Zealand’s rose seven basis points. US sovereign bonds had slumped on Friday after the December payroll data, sending the 30-year yield above 5% for the first time in more than a year.
The dollar strengthened against most of its major peers in Asia after jumping Friday following the payroll report. The Bloomberg Dollar Spot Index climbed 0.2%, rising back toward a two-year high set last week.
China ramped up its support for the yuan with a warning and tweaks to its capital controls, after the currency dropped close to a record low against the dollar in offshore trading.
The People’s Bank of China and other regulators will strengthen their management of the foreign-exchange market, deal with any behavior that may disrupt market order and prevent the risks of an overshoot in the yuan. Beijing will make sure the currency is basically stable at reasonable levels, the central bank said in a statement.
US Inflation
The next key number from the US will be inflation figures due Wednesday. Traders will also be watching the New York Fed’s one-year inflation expectations due Monday, producer prices on Tuesday and jobless claims on Thursday.
Bank of America Corp., which previously expected two quarter-point Fed rate cuts this year, said it no longer expects any, and said there’s a risk the next move is a hike. Goldman Sachs Group Inc. sees two cuts this year versus three.
Key events this week:
India CPI, Monday
ECB Chief Economist Philip Lane and Governing Council member Olli Rehn speak in Hong Kong, Monday
New York Fed President John Williams speaks, Tuesday
Bank of Japan Deputy Governor Ryozo Himino speaks, Tuesday
Eurozone industrial production, Wednesday
France CPI, Wednesday
UK CPI and US CPI, Wednesday
Chicago Fed President Austan Goolsbee, Minneapolis Fed President Neel Kashkari speak, Wednesday
Australia unemployment, Thursday
Germany CPI, Thursday
US initial jobless claims, retail sales, import prices, Thursday
Bank of America, Morgan Stanley earnings, Thursday
China GDP, property prices, retail sales, industrial production, Friday
Eurozone CPI, Friday
US housing starts, industrial production, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 1:46 p.m. Tokyo time
Nikkei 225 futures (OSE) fell 1.2%
Australia’s S&P/ASX 200 fell 1.3%
Hong Kong’s Hang Seng fell 1.3%
The Shanghai Composite fell 0.4%
Euro Stoxx 50 futures fell 0.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.3% to $1.0210
The Japanese yen rose 0.1% to 157.52 per dollar
The offshore yuan was little changed at 7.3581 per dollar
Cryptocurrencies
Bitcoin rose 0.2% to $94,483.26
Ether fell 0.7% to $3,241.4
Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.76% on Friday
Japan’s 10-year yield advanced three basis points to 1.200%
Australia’s 10-year yield advanced 10 basis points to 4.65%
Commodities
West Texas Intermediate crude rose 1.8% to $77.94 a barrel
Spot gold fell 0.1% to $2,685.82 an ounce
This story was produced with the assistance of Bloomberg Automation.
