(Bloomberg) — Shares declined in Asia and bond yields rose as investors waited on another round of US jobs data to gauge if new bets on more Federal Reserve rate hikes will be supported.
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A region-wide stock benchmark slid for a third day, with Australia leading losses. US equity futures remained on the back foot after the losses seen Thursday in the S&P 500 and Nasdaq 100 benchmarks following stronger-than-expected private hiring data.
Bond traders added to bets of more rate hikes after ADP Research Institute data on Thursday showed US companies added the most jobs in more than a year in June. Friday’s US nonfarm payrolls and unemployment reports will be key to any more revisions in rate-hike expectations, though economists surveyed by Bloomberg see the figures moderating.
“Another set of stronger numbers should further drive up expectations for a second hike in the September or November FOMC meeting,” Christopher Wong, FX strategist at Overseas-Chinese Banking Corp., said.
Treasuries extended losses in Asia with the policy sensitive two-year yield near 5%, while the 10-year hovered close to the highest since March. The two-year yield jumped as much as 17 basis points, before paring most of the gains, following the ADP report and data showing the service sector expanded in June at the fastest pace in four months.
The slide in Treasuries reverberated across Asia, with Australia’s 10-year yield climbing to the highest level since 2014, before paring the advance. New Zealand’s bond yields also jumped.
The second half of the year is set to remain volatile for bond markets, according to Robeco. “With an inverted yield curve, it’s a very hard position for bonds,” Thu Ha Chow, head of Asia fixed income at Robeco Singapore, said on Bloomberg Television.
Currencies were mixed in Asia after the Bloomberg Dollar Spot Index rose to the highest level in about four weeks Thursday. The yen was stronger, supported by comments from the Bank of Japan about a “balanced” approach toward yield-curve control.
The offshore yuan traded in a narrow range after the People’s Bank of China ramped up support for the currency again through its daily fixing.
Hawkish Fed
Swap contracts linked to the Federal Reserve’s future policy decisions almost fully price in a quarter-point interest-rate hike by July 26 and show a growing likelihood of an additional move by year-end. This expectation for higher rates is reinforcing bets on tighter monetary policy globally as central banks struggle to rein in inflation.
The US may not immediately see a cool-off in the labor market and the Fed will need to keep policy rates higher for longer to rein in inflation, according to Stuart Paul at Bloomberg Economics.
Dallas Fed President Lorie Logan voiced her concerns on Thursday that inflation was still running too hot and more tightening was needed. Stocks have been losing ground in July after a strong first half of the year as hawkishness from central banks damps hopes of a soft landing for the global economy.
Back in Asia, shares of Alibaba Group Holding Ltd. jumped 6.4% in Hong Kong after Reuters said Chinese authorities will wrap up a probe on Ant Group Co. as soon as Friday with a fine of more than $1.1 billion, capping years of scrutiny over the digital finance leader founded by Jack Ma.
US Treasury Secretary Janet Yellen held informal talks with China’s former Vice Premier Liu He and the People’s Bank of China governor Yi Gang as she began two days of talks designed to stabilize fraught ties between the two superpowers.
Investors also remained on the lookout for any stimulus decision by the Chinese government after Premier Li Qiang pledged to “spare no time” in implementing a batch of targeted policies to strengthen the country’s economic recovery.
Elsewhere, oil headed for a second weekly gain after OPEC+ leaders Saudi Arabia and Russia tightened supplies and US crude stockpiles fell. Gold steadied Friday, but remained on track for a fourth consecutive weekly loss.
Key Events This Week:
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US unemployment rate, nonfarm payrolls, Friday
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ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
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S&P 500 futures were little changed as of 6:32 a.m. London time. The S&P 500 fell 0.8%
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Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.8%
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Japan’s Topix fell 0.5%
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Australia’s S&P/ASX 200 fell 1.5%
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Hong Kong’s Hang Seng fell 0.3%
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The Shanghai Composite was little changed
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Euro Stoxx 50 futures rose 0.4%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0891
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The Japanese yen rose 0.2% to 143.73 per dollar
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The offshore yuan was little changed at 7.2498 per dollar
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The Australian dollar rose 0.2% to $0.6640
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The British pound was little changed at $1.2741
Cryptocurrencies
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Bitcoin fell 0.4% to $30,204.48
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Ether fell 1.3% to $1,859.23
Bonds
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The yield on 10-year Treasuries was little changed at 4.03%
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Japan’s 10-year yield advanced 3.5 basis points to 0.435%
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Australia’s 10-year yield advanced 13 basis points to 4.25%
Commodities
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West Texas Intermediate crude rose 0.5% to $72.16 a barrel
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Spot gold rose 0.1% to $1,913.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
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