(Bloomberg) — Asian stocks were primed to track Wall Street lower Friday, as optimism linked to the US government reopening was tempered by uncertainty over interest rates and equity valuations.
Equity-index futures for Japan and Hong Kong pointed to a weaker opening, while Australian shares fell more than 1% at the open. The S&P 500 closed 1.7% lower while the Nasdaq 100 declined 2.1% in Thursday’s session. The broad-based selling wiped 2.7% from a gauge of megacaps while the Russell 2000 benchmark of small firms lost 2.8% in New York trading.
Traditional havens offered little reprieve. The dollar, gold and Treasuries all fell Thursday, leaving the US 10-year yield five basis points higher as investors parsed commentary from Federal Reserve officials that cast doubt over a December rate cut. Also, the October jobs report will be released without a reading of the unemployment rate. Bitcoin sank below $100,000 and is down more than 20% since early October.
The moves dealt a fresh blow to risk sentiment, highlighted by heavy selling in high-flying tech giants amid mounting valuation concerns. Beneath the surface, some investors pointed to a rotation into more defensive sectors. With optimism over the US government’s reopening largely priced in, traders are now focusing on the upcoming wave of economic data, as the odds of a December rate cut slip below 50%.
“It’s an expensive market and expensive markets need lower rates to help justify today’s elevated valuations,” said Matt Maley at Miller Tabak + Co. “So, the idea that this could change quickly with so much data coming out all at once, this uncertainty is raising some fear in the marketplace.”
While President Donald Trump signed legislation to end the longest shutdown in US history, it may still take a while for the federal bureaucracy to fully restart. Even so, the October jobs report will skip the unemployment rate as household survey wasn’t conducted, US top economic adviser Kevin Hassett told Fox News’ America’s Newsroom.
Some traders may be concerned that the omission of key data due to the shutdown may bolster arguments for officials to stand pat. Currently, traders are pricing in about even odds the Fed will cut rates in December.
Chair Jerome Powell said last month that a reduction is “not a foregone conclusion,” with the decision to be premised on incoming information.
In separate statements, Fed Bank of St. Louis President Alberto Musalem said officials should move cautiously on rates with inflation running above target, while Cleveland counterpart Beth Hammack noted policy should remain “somewhat restrictive.” Minneapolis Fed President Neel Kashkari said he didn’t support the last cut and is undecided on December.
In Asia, investors await data due Friday on China’s home prices, retail sales and the jobless rate, following signs of sluggishness in the credit market. Bloomberg calculations based on data released by the People’s Bank of China on Thursday showed China’s credit expansion was the weakest in more than a year last month, dragged down by slower government bond sales and lackluster borrowing demand across the economy.
Meanwhile, Tencent Holdings Ltd. posted a faster-than-anticipated 15% rise in revenue, sustaining the steady growth that’s helped the social media leader attract investors despite eschewing splashy investments in AI infrastructure. Separately, Tencent struck a deal with Apple Inc. that will see the iPhone maker handle payments and take a 15% cut of purchases in WeChat mini games and apps, resolving a high-profile dispute.
Corporate News:
Verizon Communications Inc. is discussing plans to announce job cuts next week that could downsize the company by as much as 20%. A wave of voluntary and early retirement programs in Japan is on track to hit a four-year high, as companies from Panasonic Holdings Corp. to Japan Display Inc. try to balance an aging workforce with the need to boost competitiveness. Japan Airlines Co. has sought proposals from manufacturers for up to 70 regional and turboprop aircraft. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:16 a.m. Tokyo time Hang Seng futures fell 1.4% Australia’s S&P/ASX 200 fell 1.6% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro was little changed at $1.1626 The Japanese yen was little changed at 154.61 per dollar The offshore yuan was little changed at 7.0976 per dollar The Australian dollar was unchanged at $0.6529 Cryptocurrencies
Bitcoin rose 1.5% to $100,248.01 Ether rose 2.1% to $3,245.46 Bonds
Australia’s 10-year yield advanced four basis points to 4.46% Commodities
West Texas Intermediate crude rose 0.2% to $58.82 a barrel Spot gold rose 0.1% to $4,175.98 an ounce This story was produced with the assistance of Bloomberg Automation.
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