Business Maverick

Business Maverick

Asian stocks follow US payroll gains, oil declines: markets wrap

Asian stocks follow US payroll gains, oil declines: markets wrap
The People's Bank of China in Beijing.

Asian stocks followed gains on Wall Street after better-than-expected US payrolls data on Friday. Oil fell as Israel said it would pull some troops out from Gaza.

Benchmark equity indexes rose in Japan, Australia and South Korea. They dropped in Hong Kong and mainland China with sentiment dampened by a winding up petition for Shimao Group. Futures for US stocks crept higher after both the S&P 500 and Nasdaq 100 indexes climbed more than 1% on Friday.

While the US jobs report “once again shows that the US economy remains resilient in the face of high interest rates, focus shifts to the US CPI release this week which will be a bigger test of whether the recent inflation bump is a trend or not,” said Redmond Wong, a market strategist at Saxo Capital Markets.

Oil retreated more than 1% as traders monitored geopolitical tensions in the Middle East. Israel said on Sunday the country is removing some troops from southern Gaza, as Prime Minister Benjamin Netanyahu said victory was within reach. Still, Iran continued to prepare a response to a suspected Israeli attack on its consulate in Syria, while Hezbollah warned that it’s ready for war.

“The concession of moving troops out of Gaza is nowhere near cause to discount ongoing threats of more direct conflicts involving Iran,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. “Oil’s upside volatility remains very much present, and that’s to a large part thanks to geopolitics amplifying supply shortfalls elsewhere.”

The People’s Bank of China kept the yuan’s reference rate within its recent range in its daily fixing Monday in a bid to stabilise the currency after its slide toward the weak end of the trading band. The decision came as China’s financial markets reopened after a two-day holiday.

What China “discovered is that there was a heck of a lot more depreciation and selling pressure under the surface than they probably anticipated,” said Richard Franulovich head of foreign-exchange strategy at Westpac Banking Corp. “This is what happens periodically when you have a managed currency.”

Treasuries ticked lower as traders dialled back the prospect of Federal Reserve interest-rate cuts this year following the US jobs numbers. The unemployment rate edged lower to 3.8% in March, wages grew at a solid clip, and workforce participation rose, underscoring the strength of a labour market. 

The focus will soon shift to US March inflation data due mid-week. Prices may stay above the Fed’s target band, as first quarter corporate earnings season gears up with results from banks including JPMorgan Chase & Co. and Citigroup Inc. due on Friday.

Stock bulls are starting to hedge their exposures as Fed rate cuts are pared and questions over how far the rally may go. The Cboe Volatility Index, known as the VIX, touched the highest since November last week as the benchmark S&P 500 Index suffered its first weekly loss in three weeks. 

Elsewhere, New Zealand’s central bank, the first to hike in the post-Covid tightening cycle, is expected to push back against easing bets when it delivers its decision this week. Meanwhile, the European Central Bank is likely to keep its key rate unchanged as traders eye rate cuts within months. Minutes of the last meeting suggested a June easing is likely, while Governing Council member Yannis Stournaras last month said four cuts are possible this year.  

Shimao shares fell in Hong Kong after China Construction Bank (Asia) filed a winding-up petition against the company. 

Elsewhere, gold declined after surging to record prices last week

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