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(Bloomberg) — Asian stocks fell as the U.S. Federal Reserve’s meeting minutes indicated that interest rates will remain high for an extended period of time, and the weakening Chinese economy strengthened the risk-off mood.
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Regional stock indexes fell for the third consecutive session as benchmark stocks fell from Australia to South Korea, and Chinese stocks also fell for the third day in a row. Japan’s TOPIX index started rising, reversing an early decline on the first trading day of the new year after the holidays.
U.S. stock futures were flat in Asia after the S&P 500 index ended 0.8% lower on Wednesday, continuing a daily decline that began on the last trading day of 2023. The Nasdaq 100 fell 1.1%, its first decline in four days and its longest losing streak. within 2 months.
All eyes will now turn to Friday’s U.S. jobs report after minutes from the Federal Reserve’s December meeting suggested that interest rates may remain at restrictive levels “for some time.” Swap traders are holding back on bets on a rate cut, with the central bank pricing in a quarter-point cut in the benchmark rate by the March meeting.
“There needs to be a pause in the rise in risks,” said Jun Rong Yep, market strategist at IG Asia. “Easing extreme bullish sentiment on Wall Street, strengthening the US dollar and rising oil prices could weigh on Asian stocks.”
Chinese stocks suffered the biggest fall in Asia after reports that wages offered to Chinese workers in major cities had fallen by the most on record. The CSI300 benchmark index widened its decline, falling 1.4%. The selling also came after a private index of the country’s service activity rose to a five-month high in December.
Meanwhile, Chinese government bond yields fell to their lowest level in three years, but the offshore yuan remained stable. The People’s Bank of China cut the exchange rate Wednesday by the most in more than six months, a sign that policymakers may have shifted their focus from stabilizing the currency to easing monetary policy. The country’s finance minister said government spending will increase this year.
Redmond Wong, market strategist at Saxo Capital Markets, said Chinese stocks were “still trying to find a bottom” and that “the weakness is likely to continue in January.” “I’m not shorting the China/Hong Kong market here, but we need to see a meaningful rally.”
The region’s semiconductor and technology stocks followed Wall Street’s decline as investors continued to trim positions in 2023’s biggest winning stocks. A Bloomberg index of Asian chip makers fell for the fourth day in a row, hitting its worst level since September.
As for currencies, even after the recent rally and highest levels since November, indicators of the dollar’s strength are largely unchanged. The yen was trading above 143 yen to the dollar, having fallen by almost 1% against the dollar earlier this month.
The Japanese currency is under new pressure as recent earthquakes make it difficult for the central bank to abolish negative interest rates.
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U.S. Treasuries firmed in Asian markets after falling from their worst opening day on record as the Fed’s minutes indicated it could slow the pace of quantitative tightening. On Wednesday, the 10-year Treasury yield fell 1 basis point to 3.9%.
U.S. manufacturing data on Wednesday showed activity continuing to contract. Separate data showed the number of job openings fell slightly in November from the previous month’s revised figures, in a sign of a softening labor market.
Elsewhere, geopolitics remained the focus. Iran says the attack, which killed about 100 people in the country, was carried out to punish Iran for its stance toward Israel, raising tensions in the region. Tensions supported oil prices, which rose further on Thursday. Oil prices also rose due to supply disruptions in Libya and OPEC’s statement pledging to stabilize prices.
Bitcoin rose after Wednesday’s selloff, erasing nearly all of its gains so far this year. Gold has a higher edge.
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Eurozone S&P Global Eurozone Services PMI, Thursday
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U.S. new jobless claims, ADP employment, Thursday
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Eurozone CPI, PPI, Friday
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US non-farm payrolls/unemployed, factory orders, ISM services index, Friday
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Richmond Fed President Tom Barkin, 2024 FOMC voter, speaks on Friday
The main movements in the market are:
stock
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S&P 500 futures were little changed as of 3:04 p.m. Tokyo time.
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Japan’s TOPIX rose 0.5%
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Hong Kong’s Hang Seng fell 0.6%.
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The Shanghai Composite fell 0.9%.
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Euro Stoxx50 futures little changed
currency
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Bloomberg Dollar Spot Index little changed
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The euro was almost unchanged at $1.0928.
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The Japanese yen fell 0.3% to 143.66 yen to the dollar.
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The offshore yuan was almost unchanged at 7.1645 yuan to the dollar.
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The Australian dollar rose 0.2% to $0.6743.
cryptocurrency
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Bitcoin rose 0.7% to $43,256.46
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Ether rose 0.6% to $2,240.89
bond
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The 10-year government bond yield was almost unchanged at 3.92%.
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Japan’s 10-year bond yield remains unchanged at 0.615%
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Australian 10-year bond yield unchanged at 4.05%
merchandise
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West Texas Intermediate crude rose 0.9% to $73.37 per barrel.
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Spot gold rose 0.2% to $2,044.89 an ounce.
This article was produced in partnership with Bloomberg Automation.
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