(Bloomberg) — Asian equities slipped, tracking a drop in US stocks and Treasuries as Wall Street’s risk-on mood faded with declines in big tech.
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South Korea’s benchmark index fell more than 1% at the open, while that of Australia traded lower after nearing a record high in the previous session. Stock futures for Hong Kong pointed to a drop as well, while the Nasdaq Golden Dragon China Index, a gauge of US-listed Chinese shares, fell 3.5% on Tuesday. Japanese markets remain closed for a holiday.
Contracts for US shares were little changed after the Nasdaq 100 dropped the most in more than two months on Tuesday as tech sector giants dubbed the Magnificent Seven fell. The first trading day of the new year brought 2023’s scorching rally to a halt after a more than $8 trillion surge in the S&P 500 last year, with the Nasdaq’s fall marking its third-worst first-day performance since the 2001 dot-com bust.
Bonds worldwide also slumped Tuesday, with Treasury yields ending higher across the curve, led by the front-end. The fall partly reflects doubts that policymakers will deliver the extent of monetary easing that’s priced by money markets, with central banks reluctant to give up the fight against inflation too soon.
Treasury futures advanced modestly in early Asian hours, but trading of cash Treasuries are still closed in Asia due to the Japanese holiday. The dollar traded in narrow range against its Group-of-10 peers.
In Asia, investors will be monitoring Chinese tech stocks after Reuters reported that Beijing removed a top official who oversaw the nation’s gaming industry, suggesting the government is trying to tamp down a backlash against harsh new regulations that triggered an $80 billion rout across the sector.
Elsewhere, oil held a drop as broad risk-off sentiment undercut concerns about escalating conflict in the Red Sea.
Eyes on Fed Minutes
Traders are now waiting for the release of the latest Federal Reserve minutes Wednesday. The tone is expected to be hawkish, according to BMO Capital Markets’ Ian Lyngen.
“A dovish surprise, while unlikely, would hold far greater shock value for a market that has moved away from taking the Fed at face value in favor of a more skeptical approach,” the strategist wrote.
Wednesday’s job openings data and Friday’s nonfarm payrolls will also be scanned for signs of weakness in the labor market.
“If Fed Chairman Powell is right that inflation can slow further without a sharp increase in unemployment, then the stock and bond rallies are justified,” according to Bloomberg Economics. Kristalina Georgieva, the head of the International Monetary Fund, told CNN International that the US economy is “definitely” headed for a soft landing thanks to the Fed’s “decisiveness” in taming inflation.
Bitcoin hovered around $45,000 after climbing above that level for the first time in almost two years Tuesday on anticipation around the expected US approval for an exchange-traded fund investing directly in the biggest token.
Key events this week:
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Germany unemployment, Wednesday
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US FOMC minutes, ISM Manufacturing, job openings, light vehicle sales, Wednesday
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Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Wednesday
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China Caixin services PMI, Thursday
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Eurozone S&P Global Eurozone Services PMI, Thursday
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US initial jobless claims, ADP employment, Thursday
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Eurozone CPI, PPI, Friday
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US nonfarm payrolls/unemployment, factory orders, ISM services index, Friday
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Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 9:34 a.m. Tokyo time. The S&P 500 fell 0.6%
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Nasdaq 100 futures were little changed. The Nasdaq 100 fell 1.7%
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Hang Seng futures fell 1%
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Australia’s S&P/ASX 200 fell 1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0950
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The Japanese yen was little changed at 141.91 per dollar
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The offshore yuan was little changed at 7.1451 per dollar
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The Australian dollar rose 0.1% to $0.6769
Cryptocurrencies
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Bitcoin fell 0.2% to $45,022.74
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Ether fell 0.3% to $2,360.15
Bonds
Commodities
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West Texas Intermediate crude rose 0.2% to $70.50 a barrel
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Spot gold rose 0.1% to $2,061.03 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck.
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