By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
If the reaction in US stocks, bonds and the dollar to Friday's surprising US employment report is any guide, Asian markets are set for a bumpy ride on Monday, rocked by yet another higher bond yields and inflation fears.
The US economy created over a quarter of a million net new jobs and the unemployment rate fell last month, reflecting a robust labor market. That is good news. But the bad news for asset markets, particularly in emerging and Asian economies, is the impact on borrowing costs and the dollar.
Treasury yields rose to the highest in over a year, the dollar hit a two-year high, and traders are now anticipating just a quarter-point rate cut from the Fed this year, in September.
The S&P 500 fell to its lowest since Nov. 5, the day of the US presidential election, and it looks like rising bond yields could crush investors' appetite for riskier assets like stocks.
Japanese futures are pointing to a fall of more than 1% at the open in Tokyo on Monday, and it will be a similar story around the continent.
Sentiment is already fragile, as the massive rise in long-term bond yields has tightened financial conditions everywhere. According to Goldman Sachs, aggregate emerging market financial conditions are the tightest since late 2023.
Uncertainty about the potential blow to growth in Asia – particularly China – from the incoming Trump administration's 'America First' trade policies is another reason to be cautious if not downright bearish.
Trade figures from China on Monday are unlikely to lift the gloom. Economists polled by Reuters expect export growth to accelerate in December while imports contracted for a third straight month.
December's import figures are likely to attract more attention as they reflect the strength of domestic demand, and may therefore be seen as an early indication of how successful Beijing's stimulus efforts have been.
The trade figures are the first clutch of top-tier indicators from China this week that include house prices, retail sales, industrial production, investment, unemployment and conclude on Friday with fourth-quarter and full-year GDP.
Investors will also assess the People's Bank of China's announcement on Friday that it has halted purchases of treasury bonds, sparking speculation that it is stepping up defense of the yuan. Will this be enough to put a floor under products and the yuan?
The annual Asian Economic Forum opens in Hong Kong, and speakers on Monday include Hong Kong Monetary Authority Chief Executive Eddie Yue, CIO Liu Haoling of China Investment Corp, and European Central Bank board member Philip Lane.