Written by Jamie MacGyver
(Reuters) – A look at the day ahead in Asian markets.
If the reaction in stocks, bonds and the US dollar to Friday’s exciting US employment report is any guide, Asian markets are in for a bumpy ride on Monday, weighed down by another rise in bond yields and inflation fears.
The U.S. economy created more than a quarter of a million net new jobs and the unemployment rate fell last month, reflecting a strong labor market. This is good news. But the bad news for asset markets, especially in emerging and Asian economies, is the impact on borrowing costs and the dollar.
Treasury yields rose to their highest levels in more than a year, the dollar hit a two-year high, and traders now expect just a quarter-point rate cut from the Fed this year, in September.
The Standard & Poor’s 500 index fell to its lowest level since November 5, the day of the US presidential election, and it appears that rising bond yields may crush investors’ appetite for risky assets such as stocks.
Japanese futures point to a decline of more than 1% when trading opens in Tokyo on Monday, and the story will be similar across the continent.
Sentiment is already fragile, as the massive rise in long-term bond yields has tightened financial conditions everywhere. According to Goldman Sachs, overall emerging market financial conditions are the tightest since late 2023.
Uncertainty about the potential hit to growth in Asia – especially China – from the incoming Trump administration’s “America First” trade policies is another reason to be cautious, if not outright bearish.
Trade numbers out of China on Monday are unlikely to lift the gloom. Economists polled by Reuters expect export growth to accelerate in December while imports contract for the third month in a row.
December import figures are likely to receive more attention as they reflect strength in domestic demand, and thus perhaps can be seen as an early sign of the success of Beijing’s stimulus efforts.
The trade figures are the first set of high-level indicators from China this week that include house prices, retail sales, industrial production, investment and unemployment and culminate on Friday with gross domestic product for the fourth quarter and the full year.
Investors will also weigh the People’s Bank of China’s announcement on Friday to suspend purchases of Treasury bonds, which sparked speculation that it is strengthening the yuan’s defense. Would this be enough to set a minimum for returns and the yuan?
The annual Asian Economic Forum opens in Hong Kong, and speakers on Monday include Hong Kong Monetary Authority CEO Eddie Yeo, China Investment Corporation IT director Liu Haoling, and European Central Bank Governing Council member Philip Lin.
https://media.zenfs.com/en/reuters-finance.com/860dfc471b909bec7901903ff54ce262
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