(Bloomberg) — Asian equities and currencies declined as economic and geopolitical risks overwhelmed the market’s optimism surrounding interest-rate cuts.
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The MSCI Asia Pacific Index was set for its biggest weekly drop in three months as benchmarks in South Korea and Hong Kong slumped more than 1%. Chinese stocks fluctuated as the Third Plenum failed to convince investors about the economy’s new growth impetus. US futures edged higher after the S&P 500 fell 0.8% Thursday.
Asian currencies slipped against the greenback amid the equities selloff, with the Taiwanese dollar reaching its weakest level in more than eight years. A rout in chip stocks continued in Asia on concern the US would impose fresh restrictions on sales to China. Shares of Taiwan Semiconductor Manufacturing Co. fell for a third day.
“From a China cross-asset perspective, the Third Plenum has proved to largely be a non-event,” Kaanhari Singh, a strategist at Barclays, wrote in a note. “Without any firm and immediate read-through for markets, equity markets are likely to remain choppy caught between a rock and a hard place.”
Treasury yields edged higher after 10-year yields rose four basis points to 4.20% Thursday. The yen steadied against the greenback after a Thursday decline. Japan inflation data for June came in softer than estimated. An index of the dollar held on to gains from the prior session.
US initial jobless claims data on Thursday showed the biggest increase since early May in a sign of cooling in the labor market that supports expectations the Federal Reserve will soon cut interest rates.
The central bank is getting closer to reducing borrowing costs in September amid growing confidence that price stability is within sight. They’ve laid the groundwork for the coming move in speeches over recent weeks, and Chair Jerome Powell will likely flag it more explicitly after a policy meeting later this month.
Investors were also gauging signs that President Joe Biden’s grasp on the Democratic presidential nomination appeared to be slipping as he weighed increasingly public warnings from his party’s top lawmakers.
Back in Asia, investors will be on the lookout for fallout from China’s Third Plenum meeting. President Xi Jinping vowed to make “high-quality development” the guiding force of the world’s No. 2 economy, showing few initial signs that the top leadership is preparing to unleash major steps to boost demand or arrest the property slump.
Today’s negative price action in Asian equities has more to do with concerns over new semiconductor sector restrictions from the US and a relatively disappointing communique from China’s Third Plenum, than the “twists and turns of the US presidential race,” said Homin Lee, senior macro strategist at Lombard Odier Singapore Ltd.
New data showed Chinese investors dumped a record amount of US securities, both stocks and bonds, in May as diplomatic tensions remained elevated between the world’s largest economies.
Data set for release in the region includes second-quarter gross domestic product for Malaysia and balance of payments for the Philippines.
In corporate news, Samsung Electronics Co. has agreed to resume negotiations with the union organizing strikes across its chipmaking plants.
In commodities, oil edged lower on concerns that Chinese growth may slow and jeopardize consumption. Gold also fell amid speculation its rally to an all-time high earlier this week may have gone too far.
Key events this week:
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.2% as of 11:54 a.m. Tokyo time
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Nikkei 225 futures (OSE) fell 0.3%
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Japan’s Topix fell 0.6%
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Australia’s S&P/ASX 200 fell 1.1%
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Hong Kong’s Hang Seng fell 1.8%
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The Shanghai Composite was little changed
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Euro Stoxx 50 futures were unchanged
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Nasdaq 100 futures rose 0.3%
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 was little changed at 157.47 per dollar
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The offshore yuan fell 0.2% to 7.2835 per dollar
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The Australian dollar was little changed at $0.6705
Cryptocurrencies
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Bitcoin fell 0.2% to $63,694.7
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Ether fell 0.2% to $3,405.74
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.22%
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Japan’s 10-year yield was little changed at 1.030%
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Australia’s 10-year yield advanced six basis points to 4.30%
Commodities
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West Texas Intermediate crude fell 0.7% to $82.23 a barrel
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Spot gold fell 0.7% to $2,427.25 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Zhu Lin and John Cheng.
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