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By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
If the reaction of US stocks, bonds and the dollar to Friday’s US jobs report is any guide, Asian markets face a bumpy ride on Monday, jolted by another rise in yields of bonds and fears of inflation.
The US economy added more than a quarter of a million net new jobs and the unemployment rate fell last month, reflecting a robust labor market. This is good news. But the bad news for asset markets, particularly in emerging and Asian economies, is the impact on borrowing costs and the dollar.
Treasury yields rose to their highest in more than a year, the dollar hit a two-year high and traders are now only predicting a quarter-point rate cut from the Fed this year in September.
The S&P 500 fell to its lowest level since Nov. 5, the day of the U.S. presidential election, and it appeared that rising bond yields could crush investors’ appetite for risk assets such as stocks.
Japanese futures are pointing to a drop of more than 1% at the Tokyo open on Monday, and it will be a similar story across the continent.
Sentiment is already fragile as the explosive rise in long-term bond yields has tightened financial conditions everywhere. Aggregate financial conditions in emerging markets are the tightest since late 2023, according to Goldman Sachs.
Uncertainty about the potential impact on growth in Asia, especially China, of the incoming Trump administration’s “America First” trade policies is another reason to be cautious, if not outright bearish.
China’s trade figures on Monday are unlikely to lift the gloom. Economists polled by Reuters expected export growth to accelerate in December, while imports contracted for a third straight month.
December’s import figures are likely to attract the most attention as they reflect the strength of domestic demand and so may be seen as an early sign of how successful Beijing’s stimulus efforts have been .
The trade figures are China’s first set of top-level indicators this week including home prices, retail sales, industrial production, investment, unemployment and culminate with fourth-quarter and full-year GDP on Friday complete
Investors will also assess the People’s Bank of China’s announcement on Friday that it has suspended purchases of Treasury bonds, fueling speculation that it is intensifying its defense of the yuan. Will this be enough to put a floor under yields and the yuan?
The annual Asian Economic Forum opens in Hong Kong, with speakers on Monday including Hong Kong Monetary Authority Chief Executive Eddie Yue, China Investment Corp CIO Liu Haoling and board member of the European Central Bank Philip Lane.
