Asia’s major markets began the week on the retreat with fears of more rate hikes out of the United States depressing investors, as well as worries over a ramp-up in tensions between the US and China after last week’s ‘spy balloon’ saga.
A batch of upbeat economic data from the US may have reduced the risk of recession, but it also hinted that interest rates might have to rise again and stay up for longer.
Bond markets took a beating in the wake of promising reports on jobs and services, catching speculators short of dollars and sending the currency sharply higher.
Also on AF: Government Eyeing Amamiya as Next BOJ Governor, Nikkei Says
The outlier was Japan, though, where the surging dollar pushed the yen down and boosted exporters’ fortunes.
Tokyo’s Nikkei share average closed at its highest in more than seven weeks with trading firms also lifted by a robust earnings outlook.
The Nikkei rose 0.67% to close at 27,693.65, its highest since December 15. The broader Topix gained 0.45% to 1,979.22.
The yen was also weakened by a report the doveish Bank of Japan Deputy Governor Masayoshi Amamiya was being sounded out to be the next governor.
China stocks fell as elevated Sino-U.S. geopolitical tensions dented investor sentiment.
A US military fighter jet shot down a suspected Chinese spy balloon on Saturday, a week after it first entered US airspace and triggered a dramatic spying saga.
In a note, ING analysts wrote, that the incident could result in an “intensified tech war”, adding: “Both sides will likely impose more export bans on technology in different industries.”
Chinese shares in consumer staples dropped 1.7% and tech giants listed in Hong Kong skidded 3.7% to lead the decline. The Hang Seng Index slipped 2.02%, or 438.31 points, to 21,222.16.
The Shanghai Composite Index fell 0.76%, or 24.71 points, to 3,238.70, while the Shenzhen Composite Index on China’s second exchange dropped 0.84%, or 18.10 points, to 2,145.19.
Rate Cut Hopes Dashed
Elsewhere across the region, Sydney, Seoul, Taipei, Bangkok, Wellington Manila and Jakarta were also down.
Indian stocks dropped too with Mumbai’s signature Nifty 50 index down 0.51%, or 90.30 points, at 17,763.75.
Globally, EUROSTOXX 50 futures fell 0.6% and FTSE futures 0.3%. S&P 500 futures and Nasdaq futures both eased 0.3% as the stellar January payrolls report forced investors to price in the risk of more hikes from the Federal Reserve, and less chance of cuts later in the year.
“The employment report changed the landscape of labour markets, increasing the possibility of a soft-landing scenario where the economy avoids a severe contraction while inflation/wage growth continues to moderate,” said analysts at Nomura.
“We believe economic conditions will remain too firm for the Fed to cut rates in 2023.”
A host of Fed officials are set to speak this week, led by Chair Jerome Powell on Tuesday, and the tone could be hawkish. Policy makers from the European Central Bank and the Bank of England will also be making appearances.
Oil futures steadied on Monday, having lost 3% post-payrolls. Brent edged up 22 cents to $80.16, while US crude firmed 15 cents to $73.54 per barrel.
Key figures
Tokyo – Nikkei 225 > UP 0.67% at 27,693.65 (close)
Hong Kong – Hang Seng Index < DOWN 2.02% at 21,222.16 (close)
Shanghai – Composite < DOWN 0.76% at 3,238.70 (close)
London – FTSE 100 < DOWN 0.84% at 7,835.28 (0938 GMT)
New York – Dow < DOWN 0.38% at 33,926.01 (Friday close)
- Reuters with additional editing by Sean O’Meara
- This report was amended and updated following market close in Asia at 1015 GMT
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