Asian Stocks Dip As Traders Shift Focus To US Jobs: Markets Wrap

The S&P 500 successfully regained the critical psychological level of 5,900 after previously falling below it. This follows a turbulent trading session as investors react to upcoming economic data.

Asian stock markets experienced declines as traders on Wall Street took a cautious approach, avoiding significant investments ahead of Friday’s US jobs report. Trading sessions saw stocks fall in key markets including Tokyo and Sydney, with futures for Hong Kong reflecting a similar downward trend. Concurrently, US contracts dipped following a relatively stable day for the S&P 500 on Wednesday, with the tech-focused Nasdaq 100 showing little movement. Nvidia Corp. faced post-market losses amid reports of impending restrictions on artificial intelligence chip exports by the Biden administration.

After temporarily slipping, the S&P 500 managed to assert its position above the 5,900 threshold. On the currency front, the US dollar strengthened against most major currencies. Meanwhile, Treasuries showed signs of stabilization as a recent $22 billion bond sale provided a much-needed lift following a period of selling pressure. In early trades, Australia’s 10-year yield also noted a slight increase.

Upcoming key economic indicators from Asia include China’s inflation report, with expectations for a further decline in the Headline Consumer Price Index (CPI). The factory-gate prices are anticipated to remain significantly lower than last year, according to insights from Bloomberg Economics, indicating that recent government stimuli have yet to effectively boost demand.

The options market has indicated an expectation that the S&P 500 may see fluctuations of approximately 1.2% in either direction based on the forthcoming US employment data. This anticipated movement represents the most considerable implied change on a jobs day since September.

Economists predict that US employers likely slowed their hiring processes in the last month of a year that has displayed a trend of moderate but still positive job growth, which is expected to continue into 2025. A survey from 22V Research revealed that many investors are closely monitoring the payroll figures, with only 26% of respondents expecting a “risk-on” outcome, compared to 40% forecasting a “risk-off” scenario and 34% viewing it as “mixed/negligible.”

According to Tom Essaye from The Sevens Report, investors are interested in seeing data that aligns with a stabilized labor market to temper the recent increase in yields and provide some support for stocks.

Recent minutes from the Federal Reserve did not offer significant insights but indicated that officials would adopt a measured approach toward rate cuts due to ongoing inflation risks. Fed Governor Christopher Waller expressed confidence that inflation trends will likely continue to cool, approaching the central bank's 2% target.

It is noteworthy that US stock markets will be closed on January 9 in observance of a national day of mourning for former President Jimmy Carter, with the bond market concluding trades at 2 PM New York time.

The 10-year Treasury yield remained stable at 4.69% as of Wednesday, while the 20-year yield briefly surpassed 5%—a notable milestone since its re-introduction in 2020.

Concerns over recent bearish trends in both stocks and bonds could intensify, with traders increasingly wary of rising inflation and interest rates. However, expectations suggest that declines will not mirror the extreme dips seen in 2022, which marked a challenging year for markets in the wake of the global financial crisis, according to Morgan Stanley’s Mike Wilson. He anticipates a turbulent first half of 2025 followed by a better latter half, with current conditions differing from 2022, where the Fed aggressively raised rates—a pace that is unlikely to be repeated.

Further declines in stock prices could occur if bond yields approach levels historically associated with negative consequences for equities. Goldman Sachs analysts highlight that the correlation between equity and bond yields has turned negative again, warning that rising yields without supporting economic news could impact stock prices adversely.

Corporate Highlights

• Albertsons Cos. has raised its adjusted earnings outlook for the full year, indicating positive momentum for the retailer following the collapse of its proposed merger with Kroger Co.

• BlackRock Inc. communicated to its employees about a workforce reduction of approximately 1% after investing over $25 billion in acquisitions last year to grow in the private market sector.

• Ally Financial Inc. announced job cuts and plans to cease mortgage originations while exploring strategic options for its credit card division due to borrowers’ struggles with high debt levels.

• Constellation Energy Corp. is reportedly nearing a significant acquisition of Calpine Corp., which could rank among the largest deals ever in the power generation industry.

• Hershey Co. has approached the US's top derivatives regulator for permission to purchase large quantities of cocoa on the New York exchange due to record prices driven by global shortages.

• New York City is working to close a loophole that Uber Technologies Inc. and Lyft Inc. have reportedly exploited, potentially impacting driver compensation.

• Advanced Micro Devices Inc. has had its investment rating downgraded from buy to reduce at HSBC, which cited challenges in competing with Nvidia Corp.

• Merck & Co. was downgraded from buy to hold at Truist Securities due to growth apprehensions surrounding the pharmaceutical giant.

• Palo Alto Networks Inc. faced downgrades from multiple analysts, reflecting market concerns.

• The US utilities sector received an upgrade to overweight from market weight at RBC Capital Markets, which labeled it the “top defensive sector.”

Key Events This Week

• China CPI and PPI release on Thursday.

• Eurozone retail sales data due Thursday.

• Observance of a federal holiday in the US for the state funeral of former President Jimmy Carter on Thursday.

• Japan’s household spending and leading index data expected on Friday.

• US jobs report and consumer sentiment data will be released on Friday.

Recent movements in the financial markets are as follows:

Stocks

• S&P 500 futures declined by 0.2% as of 9:17 AM Tokyo time.

• Hang Seng futures also dropped by 0.2%.

• Japan’s Topix saw a reduction of 0.5%.

• Australia’s S&P/ASX 200 fell by 0.6%.

• Euro Stoxx 50 futures decreased by 0.5%.

Currencies

• The Bloomberg Dollar Spot Index remained stable.

• The euro's value was steady at $1.0312.

• The Japanese yen appreciated slightly by 0.1% to 158.13 per dollar.

• The offshore yuan was generally unchanged at 7.3547 per dollar.

Cryptocurrencies

• Bitcoin's price increased by 0.5% to $94,903.45.

• Ether rose by 0.9% to reach $3,328.16.

Bonds

• The yield on 10-year Treasuries was unchanged at 4.68%.

• Japan’s 10-year yield grew by one basis point to 1.185%.

• Australia’s 10-year yield rose by three basis points to 4.53%.

Commodities

• West Texas Intermediate crude oil fell by 0.1% to $73.22 per barrel.

• Spot gold prices remained steady.

This information has been curated and organized for clarity and understanding.

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