Asian Equities Drop; Yen Declines on BOJ Report:
- Hong Kong stocks headed for the lowest close in a month
- Amamiya as BOJ governor will be bullish for bonds: analysts
Stocks in Asia dropped as an unexpectedly strong US jobs report raised the prospects of more rate hikes from the Federal Reserve, while concern over US-China geopolitical tensions also weighed on sentiment.
The dollar climbed Monday after a gauge of its strength rose more than 1% Friday, when figures showed a surge in payrolls and unemployment at a 53-year low. This points to persistent US inflation and bolsters the case for more rate increases. South Korean stocks and contracts for US equities also declined.
Shares fell in Hong Kong and mainland China, with the Hang Seng Index on course for the lowest close in a month. US-listed Chinese stocks slipped Friday after the Biden administration decided to postpone Secretary of State Antony Blinken’s upcoming trip to China in light of an alleged Chinese spy balloon, that was later shot down.
“The episode should be a big surprise to investors given market’s previous expectation was that Sino-US relationship could improve after the now called-off Blinken visit,” said Willer Chen, senior research analyst at Forsyth Barr Asia.
In Japan, stocks climbed and the yen weakened after the Nikkei reported that the government had approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda as head of the central bank. While the Japanese government refuted the report, investors assume a greater likelihood of the current ultra-easy monetary policy enduring if one of its architects succeeds Kuroda.
“The chances of rejecting current policy have become slim,” said Toru Suehiro, chief economist at Daiwa Securities, in a note. “While the scrapping of yield-curve control is possible once the stabilization of the bond market is confirmed, a clear rate-hike move like ending the negative rate seems unlikely.”
US stocks halted a three-day advance on Friday in a volatile session that saw equities swerve between modest gains and losses as investors contended with the labor data.
The S&P 500 still notched a weekly gain that took the index to its highest level since August. The Nasdaq 100 also scored a weekly advance, despite heavy selling after Apple Inc., Alphabet Inc. and Amazon. com Inc. reported disappointing results Thursday.
“The Friday data had serious implications for Fed policy. Simply put, it confirms our long-standing belief that the Fed will have to go higher for longer than what optimistic market scenarios had priced in,” Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote in a note. “We still have a ways to go to get to peak Fed Funds rate, and yet folks are still looking for second half rate cuts in what would be an extremely quick turnaround.”
Yields on Treasuries rose for a second day, while Australia’s three-year yield jumped more than 10 basis points at the open.
Key events this week:
- Earnings this week are scheduled to include: AP Moller-Maersk, Apollo Global Management, AstraZeneca, BNP Paribas, BP, CME Group, Duke Energy, KKR, Nintendo, PepsiCo, Semiconductor Manufacturing International, Siemens, SoftBank Group, Toyota Motor, Uber Technologies, Unilever, Walt Disney
- Eurozone retail sales, Monday
- Australia rate decision, Tuesday
- US trade, Tuesday
- Fed Chair Jerome Powell at the Economic Club of Washington, Tuesday
- US President Joe Biden delivers the State of the Union address, Tuesday
- India rate decision, Wednesday
- US wholesale inventories, Wednesday
- New York Fed’s John Williams at event in New York
- Sweden rate decision, Thursday
- US initial jobless claims, Thursday
- ECB President Christine Lagarde participates in EU leaders summit, Thursday
- Bank of England Governor Andrew Bailey appears before Treasury Committee, Thursday
- China PPI, CPI, BoP, Friday
- US University of Michigan consumer sentiment, Friday
- Fed’s Christopher Waller and Patrick Harker speak, Friday
Source: Bloomberg.com