Stocks Drop as US Jobs Data Add to Slowdown Fear: Markets Wrap

(Bloomberg) — Asian stocks slipped to a three-week trough on Monday, with Japan leading the declines, after US jobs data added to concerns that the Federal Reserve may have waited too long to cut interest rates.

The Nikkei 225 index slumped to its lowest in a month, as the yen’s recent advance crimped the earnings outlook for exporters amid an economy that expanded slower than estimated. Equities in Australia and South Korea also racked up losses, pushing an index of Asian-Pacific shares to its lowest since Aug. 16. The yen, which had been rising on the Bank of Japan’s July rate hike and expectations of a Fed rate cut, traded just under 143 per dollar.

Signs of slack in the US economy — with the potential to spill over to export-reliant countries across Asia — are fueling concerns in the region. The US job market appears to be losing steam, China’s economy remains in the doldrums and investor euphoria about chipmakers including Nvidia Corp. is waning, adding to headwinds. 

“Asian stock markets, especially in tech-driven regions like Japan, Taiwan, and South Korea, are set to brace for a storm with their economies acutely sensitive to the brewing global downturn,” said Hebe Chen, an analyst at IG Markets Ltd. “If the dark clouds of a struggling US economy spread globally, risk-sensitive currencies like the Aussie could soon come under severe strain,” she said.

The disappointing jobs report led to a selloff in Wall Street shares on Friday. Two-year Treasuries, which are more sensitive to monetary policy, lost some of their Friday gains while the dollar edged higher on Monday. Australian and New Zealand bonds tracked the moves.

Elsewhere in Asia, Chinese assets will be in focus as officials attempt to lift sentiment by removing restrictions to foreign ownership in the manufacturing and health sectors. Seven & i Holdings Co. shares will be closely watched amid takeover offer speculation from Alimentation Couche-Tard Inc. 

The People’s Bank of China kept its buying of gold on hold a fourth month in August, a further sign that prices near record highs are crimping global central bank demand.  

In other commodities, iron ore fell below $90 a ton for the first time since late 2022, while oil rose from its lowest close since 2021.

September is proving a volatile month for markets as global stocks and commodities slumped amid fears of tepid global growth. More unease is likely as Chinese inflation and producer prices data later Monday may highlight the economic malaise that policymakers are struggling to counter. 

Traders this week will be keeping a close eye on US inflation data as worries mount the Fed has waited too long to cut interest rates as recession risks grow. Treasury Secretary Janet Yellen at the weekend sought to temper fears, seeing no “red lights flashing” for the financial system and reiterated her view that the US economy has reached a soft landing even as jobs growth weakens. Fed Governor Christopher Waller meanwhile said he was “open-minded” about the potential for a bigger interest rate cut. 

Fed policymaker comments following the jobs print “did not indicate a sense of immediate urgency in needing to cut interest rates by 50 basis points,” said Diana Mousina, deputy chief economist at AMP Ltd. in Sydney. “So, a 25 basis point cut is more likely in September, with the risk of larger rate cuts if the data indicates the need for it.” 

Some key events this week: 

• China PPI, CPI, Monday
• Australia consumer confidence, Tuesday
• China trade, Tuesday
• China’s National People’s Congress standing committee meeting begins, Tuesday
• Germany CPI, Tuesday
• UK jobless claims, unemployment, Tuesday
• Bank of Canada Governor Tiff Macklem speaks, Tuesday
• Harris-Trump debate, Tuesday
• Reserve Bank of Australia Assistant Governor Sarah Hunter speaks, Wednesday
• BOJ board member Nakagawa Junko speaks, Wednesday
• South Korea jobless rate, Wednesday
• UK industrial production, Wednesday
• US CPI, Wednesday
• Japan PPI, Thursday
• BOJ board member Naoki Tamura speaks, Thursday
• Eurozone ECB rate decision, Thursday
• US initial jobless claims, PPI, Thursday
• New Zealand PMI, Friday
• Eurozone industrial production, Friday
• France CPI, Friday
• ECB Governing Council member Olli Rehn speaks, Friday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 10:25 a.m. Tokyo time
• Nikkei 225 futures (OSE) fell 2.4%
• Japan’s Topix fell 2.3%
• Australia’s S&P/ASX 200 fell 0.9%
• Hong Kong’s Hang Seng fell 1%
• The Shanghai Composite fell 0.4%
• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1087
• The Japanese yen fell 0.3% to 142.74 per dollar
• The offshore yuan fell 0.2% to 7.1080 per dollar
• The Australian dollar rose 0.1% to $0.6681

Cryptocurrencies

• Bitcoin rose 1.2% to $55,037.78
• Ether rose 1.2% to $2,304.82

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.74%
• Japan’s 10-year yield advanced 4.5 basis points to 0.885%
• Australia’s 10-year yield advanced six basis points to 3.94%

Commodities

• West Texas Intermediate crude rose 1.4% to $68.61 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Georgina McKay.

©2024 Bloomberg L.P.