Asian Stocks Fall on Fed Hike Prospects; Yen Drops: Markets Wrap

(Bloomberg) — Stocks in Asia retreated as an unexpectedly strong US jobs report raised the prospect of more rate hikes from the Federal Reserve, while concern over US-China geopolitical tensions also weighed on sentiment.

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The dollar climbed for a third day 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.”

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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 bonds slid.

The Turkish lira was little changed against the dollar in early trading. Turkey and neighboring Syria were hit by a powerful earthquake before dawn on Monday, killing more than 110 people.

Elsewhere, oil steadied as traders took stock of the outlook for demand in China and the latest sanctions on Russian energy flows came into effect. Gold rose.

Adani Group assets are set for continued volatility this week. All of the group’s 10 stocks declined at the open in India, deepening their selloffs. Flagship Adani Enterprises Ltd. decided to shelve plans for its first-ever public sale of bonds, according to people familiar with the matter. While declines in shares were less savage on Friday than in previous days, the stock rout has roughly halved the market value of firms in the Indian group since Hindenburg Research’s claims for manipulation and accounting fraud.

“It’s clearly very important to the country because the operating businesses are so widespread,” Belita Ong, chairman of Dalton Investments, said on Bloomberg Television. “Our belief is that the government will take whatever steps are necessary to stabilize the situation, make sure the operating entities are working.”

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

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.4% as of 2 p.m. Tokyo time. The S&P 500 fell 1%

• Nasdaq 100 futures fell 0.5%. The Nasdaq 100 fell 1.8%

• Japan’s Topix index rose 0.5%

• South Korea’s Kospi index fell 1.2%

• Hong Kong’s Hang Seng Index fell 2.4%

• China’s Shanghai Composite Index fell 1%

• India’s Nifty 50 Index fell 0.8%

• Australia’s S&P/ASX 200 index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was unchanged at $1.0795

• The Japanese yen fell 0.4% to 131.65 per dollar

• The offshore yuan rose 0.3% to 6.7889 per dollar

Cryptocurrencies

• Bitcoin fell 0.1% to $22,878.93

• Ether rose 0.2% to $1,624.9

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.54%

• Japan’s 10-year yield was steady at 0.49%

• Australia’s 10-year yield advanced eight basis points to 3.46%

Commodities

• West Texas Intermediate crude rose 0.1% to $73.47 a barrel

• Spot gold rose 0.7% to $1,878.43 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson, Charlotte Yang and Michael G. Wilson.

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