Traders Face Geopolitical, Jobs Hurdles; Yen Drops: Markets Wrap

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

The dollar climbed Monday 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 US 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 Index on course for the lowest close in one 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 Japanese Finance Minister Shunichi Suzuki said he hasn’t heard anything of the governor nomination yet, 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 bond market is confirmed, a clear rate hike move like ending the negative rate seems unlikely.”

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.

“We are concerned that on the back of this kind of jobs report, it definitely holds the Fed to a higher-for-longer path,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “There are of course other data points that are going to come before the next meeting, but it certainly puts a placeholder that labor market continues to run some risk of being extremely tight.”

Yields on Treasuries rose for a second day, while Australia’s three-year yield jumped more than 10 basis points at the open. 

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 was little changed.

Adani Group assets are set for continued volatility this week. 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:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

—With assistance from Peyton Forte, Isabelle Lee, Richard Henderson and Charlotte Yang.