Asian Stocks Dip As Traders Shift Focus To US Jobs: Markets Wrap

Asian stocks experienced a decline as traders on Wall Street opted to hold back on major investments, anticipating the upcoming US jobs report. This cautious approach has led to a fall in share prices across major Asian markets, including declines in Tokyo and Sydney.

Futures for Hong Kong stocks also moved lower, and US contracts showed a slip following a steadier session for the S&P 500. The tech-heavy Nasdaq 100 managed to remain steady. Nvidia Corp. faced a dip in post-market trading after news emerged that the Biden administration plans additional restrictions on the export of artificial intelligence chips.

Despite these fluctuations, the S&P 500 managed to regain the important 5,900 psychological threshold after a brief dip below it. Meanwhile, the US dollar strengthened against most major currencies, and Treasury bonds stabilized after a successfully managed $22 billion sale mitigated some recent losses in the bond market. Australia's 10-year yield showed a slight increase during early trading sessions.

On Thursday, traders will closely observe China's inflation figures, with expectations that the Consumer Price Index (CPI) has further weakened. Experts believe that factory-gate prices in China continue to lag behind previous year's levels, indicating that government stimulus efforts have not yet significantly boosted demand as anticipated.

In the options market, there are predictions that the S&P 500 could swing roughly 1.2% in either direction in response to the upcoming US employment figures, marking the largest implied movement on a jobs day since September.

Analysts suggest that US employers moderated hiring in the previous month, wrapping up a year of stable job growth that is expected to continue into 2025. A survey found that investors are paying extra attention to payroll data. Among these, only 26% expect the employment report to signify a "risk-on" environment, while 40% anticipate a "risk-off" sentiment, and 34% remain uncertain.

Tom Essaye from The Sevens Report highlighted, "Investors will want positive data reflecting a balanced labor market to help stabilize spikes in yields and support stock markets." The most recent Federal Reserve minutes indicated that officials are adopting a cautious approach to rate cuts due to ongoing inflation risks, leading to a more gradual strategy moving forward.

The bond market on Wednesday saw the yield on 10-year Treasuries remain steady around 4.69%. A notable increase in the 20-year yield recently saw it surpass 5% for the first time since its re-introduction in 2020.

Concerns about high inflation and rising interest rates could intensify, affecting both stock and bond markets. Yet, analysts believe that the situation will not revert to the extremes witnessed during 2022's market turmoil. Morgan Stanley's chief US equity strategist predicts a volatile start to 2025, followed by a recovery phase.

As bond yields approach levels that have historically caused strain on equities, room for further declines in stock prices exists. Goldman Sachs noted a negative correlation between equity and bond yields, warning that ongoing yield increases without positive economic data could impact the stock market adversely.

Corporate Highlights

• Albertsons Cos. has raised its earnings outlook for the full year, indicating a positive trajectory for the grocer after a failed acquisition attempt with Kroger Co.

• BlackRock Inc. announced plans to cut about 1% of its workforce after investing over $25 billion in acquisitions last year focused on expanding its reach in private-market assets and data.

• Ally Financial Inc. is implementing job cuts and halting mortgage originations while exploring alternative strategies for its credit card sector due to difficulties faced by borrowers.

• Constellation Energy Corp. is reportedly close to acquiring Calpine Corp., which would mark a significant milestone in the power generation sector.

• With global cocoa shortages causing prices to soar, Hershey Co. is seeking approval from regulators to purchase a considerable amount of cocoa through the New York exchange.

• New York City is working to amend regulations that have allowed Uber Technologies Inc. and Lyft Inc. to deny drivers substantial pay, potentially raising driver rates by approximately 6.1%.

• Advanced Micro Devices Inc. has been downgraded by HSBC due to challenges competing with Nvidia Corp.

• Merck & Co. saw a downgrade from buy to hold by Truist Securities, citing concerns about its growth prospects.

• Palo Alto Networks Inc. faced downgrades from analysts, reflecting concerns about its performance.

• RBC Capital Markets upgraded the US utilities sector to overweight, labeling it the "top defensive sector."

Key Upcoming Events

• China CPI and PPI release on Thursday.

• Eurozone retail sales data will also be released on Thursday.

• A federal holiday will be observed on Thursday in the US for the state funeral of former President Jimmy Carter.

• Japan's household spending and leading index will be released on Friday.

• Friday will also see the release of the US jobs report and consumer sentiment data.

Some notable market movements include:

Stocks Performance

• S&P 500 futures fell by 0.2% as of 9:17 a.m. Tokyo time.

• Hang Seng futures dipped by 0.2%.

• Japan's Topix declined by 0.5%.

• Australia's S&P/ASX 200 fell by 0.6%.

• Euro Stoxx 50 futures are down by 0.5%.

Currencies Status

• The Bloomberg Dollar Spot Index remained relatively unchanged.

• The euro was steady at $1.0312.

• The Japanese yen rose by 0.1% to 158.13 per dollar.

• The offshore yuan remained stable at 7.3547 per dollar.

Cryptocurrency Overview

• Bitcoin saw a minor rise of 0.5%, reaching $94,903.45.

• Ether increased by 0.9%, reaching $3,328.16.

Bonds Update

• The yield on 10-year Treasuries held steady at 4.68%.

• The yield for Japan's 10-year bond rose by one basis point to 1.185%.

• Australia's 10-year yield increased by three basis points to 4.53%.

Commodities Market

• West Texas Intermediate crude dropped by 0.1%, trading at $73.22 a barrel.

• Spot gold prices remained relatively unchanged.

This article is produced with assistance from reliable sources.

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