Asia Stocks Decline After Wall Street Rally Pauses: Markets Wrap

(Bloomberg) -- Asian equities slipped, tracking a drop in US stocks and Treasuries as Wall Street’s risk-on mood faded with declines in big tech. The dollar held on to its gains. (Bloomberg) -- Asian equities slipped, tracking a drop in US stocks and Treasuries as Wall Street’s risk-on mood faded with declines in big tech. The dollar held on to its gains. South Korea’s benchmark slumped more than 2%, while shares in Hong Kong opened lower and those in mainland China were mixed. Australia retreated after nearing a record high in the previous session. Japanese markets remain closed for a holiday. The new year has started on a somber note, with stocks and bonds falling in tandem after a fourth-quarter rally that lifted both US shares and long-dated Treasuries by more than 10%. Contracts for US shares were little changed after the Nasdaq 100 dropped the most in more than two months on Tuesday as tech sector giants dubbed the Magnificent Seven fell. Treasury futures advanced modestly in early Asian hours Wednesday, but trading of cash Treasuries are still closed in Asia due to the Japanese holiday. Bonds worldwide slumped in the previous session, partly reflecting doubts that policymakers will deliver the extent of monetary easing that’s priced by money markets, with central banks reluctant to give up the fight against inflation too soon. The dollar traded in narrow range against its Group-of-10 peers. A gauge of the greenback’s strength rose the most since March on Tuesday. China tech stocks continued to retreat even after a report that Beijing removed a top official who oversaw the nation’s gaming industry. The move suggests the government is trying to tamp down a backlash against harsh new regulations that triggered an $80 billion rout across the sector. Eyes on Fed Minutes Traders are now waiting for the release of the latest Federal Reserve minutes Wednesday. The tone is expected to be hawkish, according to BMO Capital Markets’ Ian Lyngen. “A dovish surprise, while unlikely, would hold far greater shock value for a market that has moved away from taking the Fed at face value in favor of a more skeptical approach,” the strategist wrote. Wednesday’s job openings data and Friday’s nonfarm payrolls will also be scanned for signs of weakness in the labor market. “If Fed Chairman Powell is right that inflation can slow further without a sharp increase in unemployment, then the stock and bond rallies are justified,” according to Bloomberg Economics. Kristalina Georgieva, the head of the International Monetary Fund, told CNN International that the US economy is “definitely” headed for a soft landing thanks to the Fed’s “decisiveness” in taming inflation. Bitcoin hovered around $45,000 after climbing above that level for the first time in almost two years Tuesday on anticipation around the expected US approval for an exchange-traded fund investing directly in the biggest token. Oil held a drop as broad risk-off sentiment undercut concerns about escalating conflict in the Red Sea. WATCH: Comprehensive cross-platform coverage of the US market close on Bloomberg Television, Bloomberg Radio, and YouTube with Romaine Bostick, Scarlet Fu, Carol Massar and Tim Stenovec.Source: Bloomberg Key events this week: Germany unemployment, Wednesday US FOMC minutes, ISM Manufacturing, job openings, light vehicle sales, Wednesday Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Wednesday China Caixin services PMI, Thursday Eurozone S&P Global Eurozone Services PMI, Thursday US initial jobless claims, ADP employment, Thursday Eurozone CPI, PPI, Friday US nonfarm payrolls/unemployment, factory orders, ISM services index, Friday Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Friday Some of the main moves in markets: Stocks S&P 500 futures were little changed as of 10:21 a.m. Tokyo time Nikkei 225 futures (OSE) fell 0.7% Australia’s S&P/ASX 200 fell 1.2% Hong Kong’s Hang Seng fell 1.5% The Shanghai Composite fell 0.4% Euro Stoxx 50 futures fell 0.2% Currencies The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.0947 The Japanese yen was little changed at 142.09 per dollar The offshore yuan was little changed at 7.1555 per dollar Cryptocurrencies Bitcoin rose 0.2% to $45,209.63 Ether was little changed at $2,365.47 Bonds The yield on 10-year Treasuries advanced five basis points to 3.93% Japan’s 10-year yield advanced 3.5 basis points to 0.620% Australia’s 10-year yield advanced five basis points to 4.05% Commodities West Texas Intermediate crude rose 0.1% to $70.46 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation. --With assistance from Rob Verdonck. More stories like this are available on bloomberg.com ©2024 Bloomberg L.P.