Stocks Slip Ahead of US Jobs, China Yields Rise: Markets Wrap

By Pune Media On Jan 10, 2025 23

(Bloomberg) — Asian equities and US futures fell in a sign investors are being cautious ahead of jobs data that will help shape the outlook for interest rates.

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Shares in Japan and Australia slipped, while those in Hong Kong fluctuated. Contracts for the S&P 500 dropped for a second day after US trading was closed on Thursday to observe a national day of mourning for former President Jimmy Carter.

Treasuries advanced in Asian trading, following a rout earlier this week that drove 30-year yields to the highest since 2023. Chinese yields rose as the People’s Bank of China said it will temporarily halting its buying of government bonds, a surprise move that came after the benchmark yield slumped to a record low. The offshore yuan edged higher against the dollar.

“This should stem the decline in Chinese bond yields, and indirectly help support the yuan by narrowing the yield gap with the US slightly,” said Khoon Goh, head of Asia research for Australia & New Zealand Banking Group. However, should US yields rise further, “pressure on the yuan will remain,” Goh said.

Global financial markets have been volatile at the start of the year, with Treasury yields marching higher as investors moderated their view on the pace of Federal Reserve easing. That shift has reverberated through Asia, where a slowdown in Chinese growth had already sapped risk sentiment. The MSCI EM stock index entered a correction in the previous session.

Several Fed officials confirmed Thursday that the central bank will likely hold interest rates at current levels for an extended period, only cutting again when inflation meaningfully cools.

“The Fed is worried about the incoming administration,” Skyler Weinand, chief investment officer for Regan Capital, said on Bloomberg Television. The combination of the growing US fiscal deficit and a strong consumer could result in “higher interest rates for the next five to ten years,” he said.

An index of the dollar was little changed following a three-day advance. The yen was steady around 158 per dollar. Traders are on alert for the potential Japan will support the yen, with the US jobs report looming as a potential catalyst for sharp moves in the currency.

US Jobs

Friday’s US nonfarm payrolls data is expected to show a slowdown in hiring in an otherwise robust labor market. Median estimates for the figures forecast that 165,000 jobs were added to the economy in December. The unemployment rate is forecast to hold steady at 4.2% and average hourly earnings growth is seen cooling a touch from a month earlier.

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The jobs data will offer a litmus test for the market’s “hawkish Fed pricing,” according to strategists Ian Lyngen and Vail Hartman at BMO Capital Markets. They noted that the implication from the bounce in Treasuries is that the pre-payrolls setup will be slightly more balanced – despite a bias favoring a strong showing from the employment figures.

“The resulting skew will leave the Treasury market poised to respond with a stronger bid in the event of a downside surprise than any selling pressure that might emerge on a strong report,” they noted.

Elsewhere, the pound was flat Friday after slipping to a more than one-year low in the prior session as gilts sank on concern the UK’s Labour government will struggle to keep the deficit in check as borrowing costs surge. Australia’s 10-year yield climbed.

In corporate news, shares of Bloks Group Ltd., the popular Chinese maker of Ultraman and Transformers figurines, surged 82% in their Hong Kong trading debut.

Oil headed for a third weekly gain as signs of market tightness, including falling US stockpiles, offset concerns about demand weakness from China.

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 12:03 p.m. Tokyo time
Nikkei 225 futures (OSE) fell 1%
Japan’s Topix fell 0.3%
Australia’s S&P/ASX 200 fell 0.5%
Hong Kong’s Hang Seng was little changed
The Shanghai Composite fell 0.3%
Euro Stoxx 50 futures were little changed
The Australian dollar was little changed
The British pound was little changed

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0301
The Japanese yen was little changed at 158.27 per dollar
The offshore yuan was little changed at 7.3486 per dollar

Cryptocurrencies

Bitcoin rose 1.5% to $93,475.45
Ether rose 1.1% to $3,244.35

Bonds

Commodities

West Texas Intermediate crude rose 0.3% to $74.12 a barrel
Spot gold rose 0.2% to $2,673.89 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Qizi Sun.