TOKYO: Asian equities were flat on Monday as concerns over China’s crackdown on domestic internet businesses grew, erasing previous gains gained after a positive US jobs report pushed global stock markets to new highs. Japan and China, the region’s two largest markets, both fell. Following a spike in COVID-19 infections in Tokyo just weeks before the Olympics, the Nikkei dropped 0.6 percent.
Concerns about Beijing’s crackdown on Didi Global, China’s largest ride-hailing company, and investigation of other platform companies in the country sent Chinese tech stocks tumbling.
As a result, Chinese blue chips down 0.4 percent and Hong Kong’s Hang Seng fell 0.8 percent, putting pressure on MSCI’s broadest index of Asia-Pacific equities outside Japan, which fell into negative territory.
Taiwanese stocks rose 1.2 percent, while the Kospi in South Korea gained 0.3 percent.
Because U.S. markets were closed for the lengthy Fourth of July weekend, “price action might be turbulent,” and markets could be “trading on their own regional quirks rather than a macro thematic,” according to Kyle Rodda, a market analyst at IG in Melbourne.
“However, given Friday’s nonfarm payrolls statistics, things remain extremely hopeful, and I believe you’ll start to see that show through as the week progresses,” Rodda added.
“The conditions are ideal for stocks to continue to rise around the world.”
Despite Asian headwinds, the MSCI All Country World index finished at a new high of 724.66 last week, and crept slightly higher on Monday.
European equities futures saw slight increases, with Euro Stoxx 50 futures up 0.1 percent and FTSE futures rising 0.1 percent.
After closing 0.8 percent higher at a record on Friday, S&P 500 futures pointed to a 0.2 percent drop for Tuesday’s beginning. The Dow Jones Industrial Average increased by 0.4 percent, while the Nasdaq Composite increased by 0.8 percent to set a new high. Last month, nonfarm payrolls in the United States surged by an unexpected 850,000 jobs. However, the unemployment rate unexpectedly increased to 5.9% from 5.8%, and the highly monitored average hourly earnings, a barometer of wage inflation, gained 0.3 percent last month, somewhat less than the consensus prediction of 0.4 percent. In a client note, Tapas Strickland, an analyst at National Australia Bank, stated, “The goldilocks print suggests there is no need to accelerate the tapering timeframe or the anticipated rate hike profile.” “Overall, payrolls are still 6.8 million below pre-pandemic February 2020 levels, falling short of the Fed’s requirement for significant progress. As a result, there is nothing in this report that should cause the Fed to become more hawkish.” The minutes of the Federal Open Markets Committee meeting from last month will be closely scrutinized, as policymakers startled markets by announcing two rate hikes by the end of 2023. Since then, Fed officials’ comments have been more balanced, particularly from Chair Jerome Powell, and investors are looking for more hints on the timing of policy tightening in Wednesday’s release. The dollar remained fairly unchanged on Monday, after falling from a three-month high at the end of last week, weighed down by the weaker specifics of the US payrolls report. The dollar was 0.1 percent higher at 111.110 yen, and the euro was marginally higher at US$1.18615. Gold fell 0.1 percent to $1,785.03 per ounce. As the OPEC+ discussions went on, crude oil remained rangebound. Saudi Arabia’s energy minister fought back on Sunday against the United Arab Emirates’ opposition to an OPEC+ pact, calling for “compromise and rationality” when the group reconvenes on Monday. Brent crude rose 7 cents to US$76.24 a barrel, while US crude fell 4 cents to US$75.20. (Sam Holmes edited the piece.)/n
