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

This content was published on January 10, 2025 - 06:22

5 minutes

(Bloomberg) — Asian equities declined in a sign of caution ahead of US jobs data that will help shape the outlook for interest rates.

MSCI’s Asia benchmark dropped for a third session as shares in most markets dropped. Contracts for the S&P 500 were little changed after the US stock market was closed Thursday to observe a national day of mourning for former President Jimmy Carter.

Treasuries were steady 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 slightly stronger, extending a three-day advance. The yen slipped 0.1% against the greenback. 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.

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 remained under pressure 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, Nvidia hit back at signs the Biden administration will unveil fresh chip curbs. The tech giant said the White House was trying to undercut the incoming Trump administration by imposing last-minute rules. 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