Traders Face Geopolitical, Jobs Hurdles; Yen Drops: Markets Wrap

(Bloomberg) — The trading week opens in Asia with a mixed message from equity futures, along with headwinds from an unexpectedly strong US jobs report and the downing of an alleged Chinese spy balloon that’s aggravated geopolitical tensions.

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In early currency trading, the yen slumped versus the dollar after the Nikkei reported that the government had approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda as head of the BOJ. Investors assume a greater likelihood of the current ultra-easy monetary policy enduring if one of its architects succeeds Kuroda.

Adani Group assets are set for continued volatility this week, with one of the latest blows coming from Adani Enterprises Ltd. shelving plans for its first-ever public sale of bonds, according to people familiar with the matter. While declines in shares were less savage on Friday than in previous days, the stock rout has roughly halved the market value of firms in the group since Hindenburg Research’s claims for manipulation and accounting fraud.

The dollar climbed versus most of its major counterparts Monday after a gauge of the greenback’s strength rose more than 1% Friday, when figures showed a surge in payrolls and unemployment at a 53-year low. This points to persistent US inflation and bolsters the case for more rate increases from the Federal Reserve.

Contracts for Japanese and Australian equities suggested potential for small gains early Monday while those for Hong Kong were lower. US-listed Chinese stocks slipped Friday after Bloomberg News reported that the Biden administration decided to postpone Secretary of State Antony Blinken’s upcoming trip to China in light of the balloon, which loitered above sensitive US military instillations. It was later shot down, drawing protests from China.

US stocks halted a three-day advance on Friday in a volatile session that saw equities swerve between modest gains and losses as investors contended with data pointing to a robust labor market.

The S&P 500 still notched a weekly gain that took the index to its highest level since August. The Nasdaq 100 also scored a weekly advance, despite heavy selling after Apple Inc., Alphabet Inc. and Amazon. com Inc. reported disappointing results Thursday.

Yields on Treasuries spiked higher on Friday as investors took the jobs report as a signal the Fed has room to remain aggressive if inflation stays elevated. The two-year yield jumped about 20 basis at its intraday peak after touching a low for the year earlier in the week. Australia’s three-year yield jumped more than 10 basis points at the open.

“We are concerned that on the back of this kind of jobs report, it definitely holds the Fed to a higher-for-longer path,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “There are of course other data points that are going to come before the next meeting, but it certainly puts a placeholder that labor market continues to run some risk of being extremely tight.”

Key events this week:

Earnings this week are scheduled to include: AP Moller-Maersk, Apollo Global Management, AstraZeneca, BNP Paribas, BP, CME Group, Duke Energy, KKR, Nintendo, PepsiCo, Semiconductor Manufacturing International, Siemens, SoftBank Group, Toyota Motor, Uber Technologies, Unilever, Walt Disney
Eurozone retail sales, Monday
Australia rate decision, Tuesday
US trade, Tuesday
Fed Chair Jerome Powell at the Economic Club of Washington, Tuesday
US President Joe Biden delivers the State of the Union address, Tuesday
India rate decision, Wednesday
US wholesale inventories, Wednesday
New York Fed’s John Williams at event in New York
Sweden rate decision, Thursday
US initial jobless claims, Thursday
ECB President Christine Lagarde participates in EU leaders summit, Thursday
Bank of England Governor Andrew Bailey appears before Treasury Committee, Thursday
China PPI, CPI, BoP, Friday
US University of Michigan consumer sentiment, Friday
Fed’s Christopher Waller and Patrick Harker speak, Friday

Some of the main moves in markets as of 6:42 a.m. Tokyo time:

Stocks

The S&P 500 closed 1% lower Friday and the Nasdaq 100 fell 1.8%
Nikkei 225 futures rose 0.5%
Australia’s S&P/ASX 200 Index futures rose 0.2%
Hang Seng Index futures fell 0.4%

Currencies

The euro was little changed at $1.0789
The Japanese yen fell 0.9% to 132.43 per dollar
The offshore yuan was little changed at 6.8090 per dollar
The Australian dollar fell 0.3% to $0.6899

Cryptocurrencies

Bitcoin fell 2.4% to $22,862.6
Ether fell 4% to $1,613.51

Bonds

Commodities

West Texas Intermediate crude fell 3.3% to $73.39 a barrel on Friday
Spot gold fell 2.5% to $1,864.97 an ounce on Friday

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Peyton Forte and Isabelle Lee.