Asian Stocks Track US Drop On Tech, Inflation Risk: Markets Wrap

Stocks in Asia followed US peers lower after a selloff in Treasuries deepened on bets the Federal Reserve won’t cut interest rates again before July due to inflation risks.

Equities opened lower in Sydney and Tokyo, sending a regional gauge lower. A drop in Big Tech weighed on US trading, with Nvidia Corp. sinking more than 6% as a product presentation left investors wanting more. US contracts were steady after the S&P 500 fell more than 1% following a report on US service providers that showed a price gauge at the highest since early 2023.

Treasuries were little changed after falling across the curve in the previous session. A $39 billion sale of 10-year bonds drew the highest yield since 2007. 

“Rising yields are not necessarily an issue for stocks unless, of course, the economy starts to fail. Then all bets are off,” said Kenny Polcari at SlateStone Wealth. “But rising yields will be an issue if inflation rears its ugly head.”

Traders, who as recently as late September were fully pricing in another Fed rate cut by March, scrapped wagers that there will be one until the second half of the year. Separate data Tuesday showed job openings rose to a six-month high in November, boosted by a jump in business services — while other industries showed more mixed demand for workers.

To Mark Streiber at FHN Financial, the latest US services report supports the Fed’s recent communication that rate cuts would likely slow in 2025 due to upside price risks. Fed Bank of Atlanta President Raphael Bostic said officials should be cautious given uneven progress on lowering inflation.

With Treasury yields climbing again, Bank of America Corp. strategists predict traders could return to perceiving strong economic data as negative, as it signals the Fed will need to keep rates elevated for longer. Options indicate potential for a spike in US 10-year yields to 5% — a level not seen since October 2023.

Back in Asia, investors in China’s $11 trillion government bond market have never been so pessimistic. Yields on 10-year Chinese sovereign bonds have tumbled in recent weeks to all-time lows, creating an unprecedented 300-basis-point gap with US peers, despite a slew of economic stimulus measures announced by President Xi Jinping’s government.

Samsung Electronics Co.’s earnings missed estimates due to a costly effort to claw back market share in the pivotal AI chip and smartphone arenas.

Hong Kong banks, including HSBC Holdings Plc and Standard Chartered Plc, are hoarding cash and liquidity despite calls by the government to help out struggling small businesses with funding to reignite the city’s ailing economy. They held an aggregate liquidity coverage ratio of more than 180% in the second quarter, the highest ever and almost double the 100% requirement.

Oil rose a second day on Wednesday after an industry report pointed to another drop in US inventories, and Bitcoin traded below $100,000. 

Key events this week:

• Eurozone PPI, consumer confidence, Wednesday

• US ADP employment, Fed minutes, consumer credit, Wednesday

• Fed’s Christopher Waller speaks, Wednesday

• China CPI, PPI, Thursday

• Eurozone retail sales, Thursday

• US state funeral and national day of mourning for former President Jimmy Carter is a federal holiday, Thursday

• Fed’s Patrick Harker, Thomas Barkin, Jeff Schmid and Michelle Bowman speak, Thursday

• Japan household spending, leading index, Friday

• US jobs report, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 9:05 a.m. Tokyo time

• Japan’s Topix fell 0.5%

• Australia’s S&P/ASX 200 was little changed

• Euro Stoxx 50 futures rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0344

• The Japanese yen was little changed at 158.11 per dollar

• The offshore yuan was little changed at 7.3420 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $96,746.25

• Ether rose 0.6% to $3,382.37

Bonds

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

• Australia’s 10-year yield advanced six basis points to 4.53%

Commodities

• West Texas Intermediate crude rose 0.6% to $74.66 a barrel

• Spot gold was little changed