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Dollar Strengthens as Traders Weigh China Outlook: Markets Wrap

By Kemal Pasha

The dollar rose in early Asian trading on Monday as the diminishing prospect of any significant stimulus from China damped appetite for risk taking.

Bloomberg News

Brett Miller

Published Mar 05, 2023  •  3 minute read

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(Bloomberg) — The dollar rose in early Asian trading on Monday as the diminishing prospect of any significant stimulus from China damped appetite for risk taking.

Government bond yields declined in Australia and New Zealand, tracking moves in Treasuries on Friday, when the rate on 10-year US debt closed back below the closely watched 4% level.

While US stocks ended the week on a high note, driven by speculation that the Federal Reserve won’t raise interest rates beyond peak levels already priced in, news from China over the weekend may sap enthusiasm. Premier Li Keqiang unveiled an economic growth target of around 5%, which was below market expectations and reduces the likelihood of extra government spending that would boost asset prices.

That throws into question the momentum of the recent rebound of stocks in China and more broadly across Asia. A gauge of the region’s equities rallied 1.5% last week after a near 6% slump in February.

A rally in the S&P 500 Friday helped snap a three-week losing streak while the Nasdaq 100 scored its best day since early February. Sentiment remained upbeat despite a report showing resilience in the service sector, as some investors wagered the impact of the Fed’s hikes on the economy would be delayed. A measure of prices paid by service providers showed costs rising at a slower pace, which was cheered by traders.

The moves in US shares flowed through into stock futures for Japan, Australia and Hong Kong, which all advanced before the developments in China.

This week brings a slew of key economic data and events for investors to consider. In Asia, eyes remain on the National People’s Congress in Beijing for any further policy announcements and details that may set the tone for how market friendly — or harsh — regulation will be through 2023. Australia’s interest rate decision will be in focus Tuesday and on Friday comes the last Bank of Japan policy decision under the current governor Haruhiko Kuroda.

Globally, traders will be watching the US non-farm payrolls report for clues on whether the economy can handle more rate hikes. Data last week showed continued labor-market resilience in the US, supporting the case for the Fed to stick to its tightening policy, a theme that had pushed almost every major asset into the red in February. Investors will also be glued to their screens when Fed Chair Jerome Powell speaks before Senate and House committees this week.

Key events this week:

  • US factory orders, durable goods, Monday
  • US wholesale inventories, consumer credit, Tuesday
  • Fed Powell’s semiannual Monetary Policy Report to the Senate Banking Committee, Tuesday
  • Australia rate decision, Tuesday
  • Euro area GDP, Wednesday
  • US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings, Wednesday
  • Fed Chair Powell’s semiannual Monetary Policy Report to the House Financial Services Committee, Wednesday
  • Canada rate decision, Wednesday
  • EIA crude oil inventories, Wednesday
  • China CPI, PPI, Thursday
  • US Challenger job cuts, initial jobless claims, household change in net worth, Thursday
  • Bank of Japan policy rate decision, Friday
  • US nonfarm payrolls, unemployment rate, monthly budget statement, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 1.6% on Friday
  • The Nasdaq 100 rose 2% on Friday
  • Nikkei 225 futures rose 1.1%
  • Australia’s S&P/ASX 200 Index futures rose 0.9%
  • Hang Seng Index futures rose 0.5%

Currencies

  • The euro was little changed at $1.0625
  • The Japanese yen was little changed at 135.98 per dollar
  • The offshore yuan fell 0.3% to 6.9130 per dollar
  • The Australian dollar fell 0.2% to $0.6757

Cryptocurrencies

  • Bitcoin fell 0.3% to $22,411.75
  • Ether fell 0.5% to $1,564.26

Bonds

  • The yield on 10-year Treasuries declined 10 basis points to 3.95% on Friday
  • Australia’s 10-year yield declined seven basis points to 3.83%

Commodities

  • West Texas Intermediate crude rose 2% to $79.68 a barrel on Friday
  • Spot gold rose 1.1% to $1,856.48 an ounce on Friday

This story was produced with the assistance of Bloomberg Automation

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Kemal Pasha