Asian Equities Slide; Treasury Yields Decline: Markets Wrap

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(Bloomberg) — Asian equities opened lower Wednesday in subdued trading following a holiday for US markets. Treasury yields moved lower and major currencies were little changed.

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Stocks fell in Japan, South Korea and Australia, along with futures for the S&P 500 and Nasdaq 100. Contracts for Hong Kong’s Hang Seng Index also slipped.

Global stock market trading was light on Tuesday given the Independence Day celebration in the US. Europe’s Stoxx 600 inched up on trading volume that was a third lower than the 30-day average.

Yield on the two-year Treasury fell around three basis points to 4.9% as trading resumed on Wednesday. The 10-year yield hovered around 3.84%. The two-year yield on Monday had exceeded the 10-year rate by the largest amount since March, when the key 2s10s segment of the yield curve became the most inverted since the 1980s.

Investors in Asia will be looking to the Caixin China purchasing managers’ index for further clues on the health of the world’s second largest economy. The nation’s stock market has underperformed global and regional benchmarks this year and the currency has been under downward pressure.

Looking further ahead, Friday’s US nonfarm payrolls report will be a key event for markets that offers hints on the trajectory of monetary policy.

The offshore yuan was little changed in early trading Wednesday. It will be in focus later in the morning when China’s central bank announces its daily fix for the currency.

“The Chinese economy is totally on a different path right now and that is truly being reflected in their currency as well,” Charu Chanana, a strategist at Saxo Capital Markets, said on Bloomberg Television. She added that authorities seem to be tolerating the depreciation of the yuan so long as the pace is steady.

The yen was slightly stronger than the 145 level versus the dollar but still in an area that creates unease among policymakers in Tokyo. The Australian dollar steadied following whipsaw-like moves Tuesday when the central bank held interest rates unchanged while warning there may be increases ahead.

After US stocks rallied hard in the first half of the year, investors are now worried that higher rates and a worsening economic backdrop will limit gains from here on.

Citigroup Inc.’s Chris Montagu said positioning looks “very extended” and cited data showing that investors piled into bullish bets on US stock futures toward the end of June.

Among other notes of caution, Goldman Sachs Group Inc. strategists wrote that it’s too early to dismiss the risk of higher interest rates weighing on stocks.

Elsewhere in markets, oil remained higher after major OPEC+ producers Saudi Arabia and Russia announced output cuts to stem a slide in prices. West Texas Intermediate rose past $71 a barrel.

Key events this week:

  • China Caixin services and composite PMI, Wednesday

  • Eurozone S&P Global Eurozone services PMI, PPI, Wednesday

  • OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday

  • FOMC issues minutes on June policy meeting, Wednesday

  • New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday

  • US initial jobless claims, trade, ISM services, job openings, Thursday

  • Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday

  • US unemployment rate, nonfarm payrolls, Friday

  • ECB’s Christine Lagarde addresses an event in France, Friday

Some of the main moves in markets today:

Stocks

  • S&P 500 futures fell 0.1% as of 9:18 a.m. Tokyo time

  • Nasdaq 100 futures fell 0.2%

  • Japan’s Topix index fell 0.6%

  • Australia’s S&P/ASX 200 Index fell 0.2%

  • Hong Kong’s Hang Seng futures fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0884

  • The Japanese yen was little changed at 144.49 per dollar

  • The offshore yuan was little changed at 7.2321 per dollar

  • The Australian dollar was little changed at $0.6693

Cryptocurrencies

  • Bitcoin was little changed at $30,820.52

  • Ether fell 0.1% to $1,939.46

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

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©2023 Bloomberg L.P.

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