Business Maverick

Business Maverick

Stocks in Asia drop for third day on Fed concern: markets wrap

Stocks in Asia drop for third day on Fed concern: markets wrap
A pedestrian crosses the street outside the Bank of England in London, Britain, 23 January 2023. (Photo: EPA-EFE / TOLGA AKMEN)

Shares in Asia fell for a third day, following losses on Wall Street, as better-than-expected US labour-market data boosted speculation the Federal Reserve will maintain its tight policy for longer.

Equity benchmarks in Japan, Australia and Hong Kong all declined, while those in mainland China were little changed. Taiwan’s markets are shut due to the approach of a typhoon. Evergrande Property Services Group Ltd., a unit of the highly indebted developer, slid by about half in Hong Kong as the company resumed trading for the first time since March 2022. 

US equity futures nudged higher in Asia after the S&P 500 slipped 1.4% on Wednesday, its worst day since April. The Nasdaq 100 fell 2.2% and Qualcomm Inc. dropped on a tepid revenue forecast. The VIX index, known as Wall Street’s “fear gauge” rose to the highest since May. 

“We’re seeing the negative reaction overnight, harking back to the perception that we’re fully valued in the US,” Lucy Meagher, an investment adviser for Evans and Partners Pty in Sydney, said on Bloomberg Television. Investors should consider rotating into small-caps from large-caps and away from US stocks into emerging markets, she said.

Treasuries edged lower in Asia, after a Wednesday selloff pushed 10-year yields to the highest since November. The selling was helped along by private payrolls data that showed US companies added 324,000 workers last month, beating the consensus forecast of 190,000. Bill Ackman, founder and chief executive officer of Pershing Square Capital Management, said he had shorted 30-year Treasuries, which he described as overbought from a supply and demand perspective.

Rising issuance

Investors also digested news that the Treasury will issue $103-billion of securities next week, spanning three-, 10- and 30-year debt. The quarterly issuance is up from $96 billion, and slightly more than forecast. The news followed Fitch Ratings’ downgrade of the US on Wednesday.

Japanese 10-year bonds fell as investors tried to judge how much the Bank of Japan will allow yields to rise under its more flexible yield-curve control regime. The dollar was little changed after a two-day rally in muted currency market trading.

The Bank of England is forecast to raise its benchmark interest rate by 25 basis points to 5.25% later Thursday. Speculation is also growing that it will surprise economists by signalling an increase to the pace of bond sales as it looks to reduce its outsized footprint in the market. 

PayPal Holdings Inc. said a key measure of profits shrank in the second quarter as the company had to set aside more money to cover souring loans it has made to merchants. Shopify Inc. reported sales and profit for the second quarter that beat analyst expectations.

Investors will be keeping a keen eye on Apple Inc. earnings due Thursday. The iPhone maker is expected to report its third consecutive year-over-year revenue decline. Amazon.com Inc. will also report quarterly results Thursday with investors and analysts closely watching its cloud computing business.

Elsewhere, oil rose after a two-day selloff, gold ticked higher and Bitcoin traded just above $29,000. DM

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