Currencies, Stocks Mixed in Cautious Asian Trading: Markets Wrap

(Bloomberg) — Stocks and currencies were mixed in Asia on Monday amid cautious trading and reduced liquidity with many markets closed for holidays.

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Key indexes for mainland China edged higher, Japan’s Topix fluctuated and South Korea’s Kospi gauge declined. Other markets including Hong Kong, Singapore and Australia were shut.

Appetite for risk taking was damped by concerns over China’s ability to cope after abandoning its Covid Zero policy. This was most evident in a drop in the Australian dollar, which is particularly sensitive to the outlook for demand in China.

Amid a new wave of infections, China’s National Health Commission said it would stop publishing daily case numbers for the coronavirus, complicating the task for investors trying to assess the economic impact.

The yen made a small gain against the dollar as traders consider the possibility of the Bank of Japan raising interest rates next year after last week’s surprise adjustment to its 10-year yield target.

Figures on Friday showed Japan’s key inflation gauge further accelerated to the fastest pace since 1981, which may support more bets for a shift from the BOJ.

Meanwhile, shares on Wall Street ended Friday’s session with gains as investors digested data showing that US inflation is continuing to ease and the Federal Reserve’s rate hikes are serving their purpose.

That provided a degree of support for Asian markets, though the S&P 500 and the tech-heavy Nasdaq 100 still suffered their third week of losses.

Looking across all the year for global equities, 2022 has been the worst annual performance in more than a decade.

“The Fed has been telling us they are going to tighten financial conditions until a recession or something ‘breaks’,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “This is not a great place to own speculative assets, especially the long-duration variety telling me in times like this, cash itself is the best at the money put.”

There will be no cash trading on Monday of Treasuries, which ended a holiday-shortened session lower on Friday. The benchmark 10-year yield climbed the most last week since early April, ending Friday around 3.75%.

Data on Friday showed the Federal Reserve’s closely watched measure of inflation cooling and consumer spending stagnating. Consumers’ year-ahead inflation expectations also dropped this month to the lowest since June 2021, a survey by the University of Michigan showed.

Elsewhere in markets, Bitcoin was little changed below $17,000 on Monday as the crypto world continued to reel from the collapse of FTX.

In commodities, everything from oil to gold and copper rose on Friday. Oil posted a substantial weekly gain as Russia said it may cut crude production in response to the price cap imposed by the Group of Seven on its exports, highlighting risks to global supplies in the new year.

Key events this week:

China industrial profits, Tuesday
US wholesale inventories, Tuesday
BOJ summary of opinions of Dec. 19-20 meeting, Wednesday
US initial jobless claims, Thursday
ECB publishes economic bulletin, Thursday

Some of the main moves in markets:

Stocks

Japan’s Topix rose 0.1% as of 10:46 a.m. Tokyo time
South Korea’s Kospi fell 0.3%
The Shanghai Composite rose 0.2%
The S&P 500 closed 0.6% higher on Friday while the Nasdaq 100 rose 0.3%

Currencies

The euro was little changed at $1.0615
The Japanese yen rose 0.3% to 132.48 per dollar
The offshore yuan was little changed at 7.0009 per dollar
The Australian dollar fell 0.4% to $0.6694

Crypto currencies

Bitcoin rose 0.1% to $16,851.96
Ether rose 0.2% to $1,220.8

Bonds

Commodities

West Texas Intermediate crude rose 2.7% to $79.56 a barrel on Friday
Spot gold rose 0.3% to $1,798.20 an ounce on Friday

This story was produced with the assistance of Bloomberg Automation.