Stocks struggle after soft US data hurt sentiment: Markets wrap

European equity futures were a lonely bright spot, as Asia tracked losses on Wall Street after US data showed a softening in the labor market. The dollar and yen strengthened on concern of rising tensions between America and China.

Contracts for the region-wide Euro Stoxx 50 inched higher while US equity futures were flat. Shares in China, Australia and Japan all fell. South Korea’s tech-reliant Kospi Index pulled back after getting close to a bull market, following Thursday’s decline in the Nasdaq 100.

The dollar advanced against most of its Group-of-10 peers, with a gauge of its strength set for its first weekly gain in six weeks. The yen outperformed as signs of worsening ties between the US and China spurred traders to buy the haven currency before the weekend.

US President Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China’s economy by US businesses, people familiar with the internal deliberations said. The move is another measure in the years-long economic campaign against China.

“It’s just the next step in a long line of such restrictions that adds to underlying tension between the US and China, raises the cost of trade, and moves the world further away from peak globalization,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney.

Still, equity investors largely shrugged off the impact of Biden’s intended measures, with analysts saying most are already braced for a decoupling between the two economies. Shares of Chinese chipmakers slid on Friday after opening higher, though traders said the pullback came after a recent rally rather than the latest news.

“I don’t think the US-China tensions are something new to the market but clearly that will continue to be an overhang to equity market investors,” Kinger Lau, chief China equity strategist for Goldman Sachs Group Inc. said in an interview with Bloomberg Television. “We remain overweight A-shares in our regional allocation framework,” he said, referring to onshore stock in China.

Recurring claims for US unemployment benefits jumped to the highest level since November 2021, adding to signs the labor market is beginning to cool. Sales of previously-owned homes fell in March by more than economists forecast, underscoring a housing market that’s still on shaky footing despite some signs of stabilizing. US mortgage rates rose for the first time since early March.

The data led traders to pare bets on more Federal Reserve rate hikes. The policy-sensitive two-year Treasury yield dropped two basis points to 4.12% after sliding 10 basis points on Thursday.

Fed Bank of Cleveland President Loretta Mester signaled support for another rate hike to quell inflation while flagging the need to watch recent bank stress that may crimp credit and damp the economy. Her Dallas counterpart Lorie Logan said inflation has been “much too high,” while outlining measures to watch.

Despite the equity market declines there were bright spots. Shares in Rakuten Bank jumped by a third in its debut in Tokyo in the biggest initial public offering in Japan since 2018.

In China, Contemporary Amperex Technology Co. shares rallied after the battery maker’s revenues surged in the first quarter.

In other markets, oil extended declines after dropping by the most in more than a month on Thursday, wiping out almost all of the gains stemming from OPEC+’s output cut on signs of a global economic slowdown. Gold was little changed around a $2,000 an ounce.

Key events this week:

• PMIs for Eurozone, Friday
• Japan CPI, Friday
• Fed’s Lisa Cook discusses economic research at an event, Friday

Some of the main moves in the market:

Stocks

• S&P 500 futures were little changed as of 2:52 p.m. Tokyo time. The S&P 500 fell 0.6%
• Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.8%
• Japan’s Topix fell 0.1%
• Australia’s S&P/ASX 200 fell 0.4%
• Hong Kong’s Hang Seng fell 1.1%
• The Shanghai Composite fell 1.4%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1% to $1.0958
• The Japanese yen rose 0.3% to 133.86 per dollar
• The offshore yuan fell 0.2% to 6.8949 per dollar

Cryptocurrencies

• Bitcoin was little changed at $28,194.65
• Ether fell 0.2% to $1,933.42

Bonds

• The yield on 10-year Treasuries was little changed at 3.52%
• Australia’s 10-year yield declined four basis points to 3.45%

Commodities

• West Texas Intermediate crude fell 0.2% to $77.23 a barrel
• Spot gold fell 0.5% to $1 994.51 an ounce