WELLINGTON/HONG KONG (Mar 9): Asian stocks and bonds fell, tracking a selloff in the U.S., after American jobs data spurred traders to bring forward bets on higher interest rates and Japanese growth was revised down. The dollar held gains, while oil and copper slipped.
The MSCI Asia Pacific Index slid 0.8 percent by 10:52 a.m. in Tokyo, extending last week’s drop as Japan’s Topix index slipped from a seven-year high. U.S. index futures were down 0.1 percent. Yields on 10-year Australian and Japanese bonds climbed at least two basis points, as Treasury notes held near a 2015 low. The dollar jumped 0.9 percent against the Malaysian ringgit and touched an 11-year high to the euro as the European Central Bank’s bond buying program starts Monday. Brent oil fell for a fourth day and copper declined after Chinese imports of the metal tumbled.
A bigger-than-projected increase in U.S. payrolls and surging Chinese exports to America underscored how the world’s largest economy is diverging from other nations as the Federal Reserve ponders when to begin raising interest rates. The odds of a U.S. rate increase by September jumped to 60 percent, from 49 percent on Thursday, futures showed. Data Monday signaled Japan’s rebound from recession was weaker than expected.
“The market’s response to the much-awaited U.S. payrolls report was abrupt,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., said in a note to clients. “This will provide sufficient ammunition for the Fed to remove patience from their statement at the next meeting and undertake an initial rate hike in June.”
The Topix dropped 0.5 percent in Tokyo, declining from its highest close since December 2007. Japanese gross domestic product expanded an annualized 1.5 percent in the fourth quarter, from the previous three months, down from a preliminary reading for 2.2 percent growth. It followed two straight quarters of contraction spurred by an increase in the country’s sales tax last April.
Hong Kong’s Hang Seng Index retreated 0.7 percent and a gauge of Chinese shares in the city dropped 1.2 percent. The Shanghai Composite Index was 1.1 percent lower. Australia’s S&P/ASX 200 Index sank 1.2 percent, led by utilities and materials producers, after the price of iron ore extended its decline at a record low. Iron ore delivered to China’s Qingdao slipped 4.9 percent last week to $59.49 a dry metric ton.
The Kospi index in Seoul fell 0.6 percent, while New Zealand’s NZX 50 Index lost 0.2 percent.
Benchmark U.S. stock gauges slumped more than 1 percent on Friday, with the Standard & Poor’s 500 Index dropping the most since Jan. 5 after the jobs data. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed Monday after surging 1.2 percent on Friday to a record high, its biggest one-day jump since November 2011.
The Fed, which is set to review policy March 18, has pledged this year to be “patient” on increasing benchmark borrowing costs as the American recovery gathers pace while economies from Europe to China show signs of strain. Federal Reserve Chair Janet Yellen has said the timing of any rate rise will depend on economic data. The prospect of higher U.S. rates has seen the dollar outperform most global peers in 2015.
The dollar was little changed at 120.75 yen after climbing to 121.28 in the previous session, the strongest level since Dec. 8. It bought 3.6845 ringgit and gained 0.9 percent to 1,109.28 won.
The U.S. currency reached $1.0823 per euro, its strongest since Sept. 4, 2003, with the ECB to embark on its 1.1 trillion- euro ($1.2 trillion) quantitative-easing plan. Greece’s anti- austerity government is threatening to call a referendum on policy, with a euro-area finance ministers meeting on Monday expected to withhold further aid payments to the debt-saddled nation.
Government bonds from New Zealand to South Korea retreated as Treasuries held declines. Yields on 10-year U.S. notes held at 2.24 percent, the highest level since December, after climbing 13 basis points on Friday.
Rates on Australian notes due in a decade rose 12 basis points, or 0.12 percentage point, to 2.76 percent, while similar-maturity Japanese debt paid 0.41 percent, 2 1/2 basis points more than at the end of last week. Korean 10-year yields climbed seven basis points to 2.39 percent, the biggest jump in three weeks, and rates on New Zealand bonds added six basis points to 3.42 percent.
Exports from China rose 15 percent in the January-February period, surpassing the government’s 6 percent goal for all of 2015. February exports surged 48 percent from a year earlier, with the data skewed by distortions from the timing of the Lunar New Year holiday. Imports slid a more-than-estimated 20.5 percent in February, capping a fourth straight month of contraction and signaling ongoing weakness in domestic demand.
China lowered its 2015 economic growth target last week to 7 percent, the slowest pace since 1990, just days after the People’s Bank of China cut interest rates for the second time in three months. The yuan slipped 0.1 percent to 6.2661 per dollar Monday in onshore trading after the PBOC cut the currency’s reference rate to the lowest since Nov. 7.
Copper traded near the lowest in almost two weeks after data Sunday showed imports of the metal by China, which accounts for almost half the world’s consumption, fell by the most in four years.
Brent crude dropped 0.7 percent to $59.32 a barrel, following its steepest weekly decline since the start of January. West Texas Intermediate oil lost 0.4 percent to $49.42 a barrel after sliding 2.3 percent on Friday.
Oil demand was weaker than expected last year and will rise by 1.2 million barrels a day this year, OPEC Secretary-General Abdalla El-Badri told a conference at the weekend. Brent will probably reverse recent gains as the global oil inventory build resumes, Goldman Sachs Group Inc. analysts wrote in an e-mailed report.
The dollar’s post-payrolls advance damped the investment appeal of commodities. The Bloomberg Commodity Index fell 0.9 percent Friday to the lowest level since Jan. 29.
Rubber futures lost 1.1 percent Monday, while contracts on wheat, corn and soybeans advanced at least 0.4 percent. Gold for immediate delivery was up 0.4 percent at $1,171.60 an ounce, clawing back some of last week’s 3.8 percent drop.
“Investors are looking and focusing entirely on what the Federal Reserve will do in the coming months,” Chad Morganlander, a money manager at Stifel, Nicolaus & Co., which oversees about $170 billion, said by phone on Friday. “Effectively good news in this data point supports the notion that they will raise rates in the not-too-distant future.”
The Fed has kept its benchmark, the target for overnight loans between banks, in a range of zero to 0.25 percent since December 2008 to support the economy. Most central-bank officials expect to raise rates this year, according to projections released in December. A number said since then an increase around mid-year was possible.