(Bloomberg) — Asian stocks fell along with European and U.S. stock futures, as traders trimmed their bets on Federal Reserve interest rate cuts after Friday’s payroll data. The pound continued the decline it witnessed last week.
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The MSCI Asia Pacific Stock Index fell for a fourth day, with indices across the region falling. Oil prices rose to their highest levels in four months as a new wave of US sanctions on Russia threatens to reduce supplies. The Bloomberg dollar gauge rose to its highest level in two years.
“The market is really going with the story that there will be fewer and fewer cuts” by the Fed, Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB, said in an interview with Bloomberg TV. “At this point, you still have a lot of uncertainty at least in terms of Trump’s next policies.”
The MSCI Asia Pacific Stock Index fell as much as 1.1%, sending the index down more than 3% this month.
Chinese stocks continued their losses even after local data showed exports rising to a record level last year. This could be one of the last high points for trade in the country, as US President-elect Donald Trump has promised to impose higher tariffs on Chinese goods when he takes office next week.
Brent crude rose above $81 a barrel in early Asian trade, after rising nearly 4% on Friday. This was after the United States imposed its most aggressive and ambitious sanctions yet on the Russian oil industry, targeting two major exporters, two insurance companies, and more than 150 tankers.
The pound fell as much as 0.7% to $1.2126, the weakest level since November 2023, after falling 1.7% last week.
“The slowdown in the economy and the growing dual current and financial account deficits are negative for sterling,” said Christopher Wong, foreign exchange strategist at Oversea-Chinese Banking Corp in Singapore.
Bonds decline
Bonds fell in Asia after Treasuries fell last week. Australian 10-year bond yields rose as much as 12 basis points to 4.66%, while New Zealand yields rose seven basis points.
US sovereign bonds fell on Friday after December payrolls data, pushing the 30-year yield above 5% for the first time in more than a year. There was no cash trading of Treasuries in Asia on Monday due to a holiday in Japan.
China reinforced its support for the yuan with a warning and adjustments to capital controls, after the currency fell near a record low against the dollar in offshore trading.
The People’s Bank of China and other regulators will work to strengthen their management of the foreign exchange market, deal with any behavior that may disrupt market order and prevent the risk of the yuan’s overvaluation. The central bank said in a statement that Beijing will ensure that the currency is fundamentally stable at reasonable levels.
Inflation in the United States
The next major figure from the US will be inflation figures due on Wednesday. Traders will also be watching the New York Fed’s one-year inflation forecast due Monday, producer prices on Tuesday and jobless claims on Thursday.
Bank of America, which previously expected to cut interest rates by a quarter of a percentage point this year, said it no longer expected any cut and said there was a risk that the next step would be to raise interest rates. Goldman Sachs Group is witnessing two cuts this year compared to three cuts.
Main events this week:
Consumer price index in India, Monday
European Central Bank chief economist Philip Lane and Governing Council member Olli Rehn speak in Hong Kong on Monday
New York Fed President John Williams speaks on Tuesday
Bank of Japan Deputy Governor Ryozo Himeno speaks on Tuesday
Industrial production in the eurozone, Wednesday
French Consumer Price Index, Wednesday
UK CPI and US CPI, Wednesday
Chicago Fed President Austan Goolsbee and Minneapolis Fed President Neel Kashkari speak on Wednesday
Unemployment in Australia, Thursday
German Consumer Price Index, Thursday
US Initial Jobless Claims, Retail Sales, Import Prices, Thursday
Bank of America and Morgan Stanley earnings on Thursday
China GDP, property prices, retail sales, industrial production, Friday
Eurozone consumer price index, Friday
US housing construction begins, industrial production, Friday
Some key movements in the markets:
Stocks
S&P 500 futures were down 0.4% as of 3:49 p.m. Tokyo time.
S&P/ASX 200 futures rose 0.1%.
The Hang Seng Index in Hong Kong fell by 1.1%.
Shanghai Composite Index fell 0.3%
Euro Stoxx 50 futures fell 0.3%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%.
The euro fell 0.3 percent to $1.0217
There was little change in the Japanese yen at 157.58 to the dollar
The yuan in external transactions rose 0.1 percent to 7.3527 per dollar
Cryptocurrencies
Bitcoin fell 0.9% to $93,507.34
Ethereum fell 2.1% to $3,196.96
Bonds
The yield on the 10-year Treasury note rose seven basis points to 4.76%.
The yield on 10-year Japanese bonds rose three basis points to 1.200%.
The Australian 10-year bond yield rose nine basis points to 4.63%.
Goods
This story was produced with assistance from Bloomberg Automation.
