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U.S. stock futures slip, European shares drop
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Yen skids as market eyes possible BOJ governor
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Investors ponder U.S. rates with host of Fed speakers due
(Updates prices)
By Amanda Cooper
LONDON, Feb 6 (Reuters) - Global shares slipped on
Monday, after a run of upbeat economic data suggested interest
rates will have to rise further and stay higher for longer,
while a stronger dollar and political turbulence hit risk-linked
assets.
Last week's blockbuster U.S. jobs report sent investors
scurrying to load up on dollars to the detriment of emerging
market assets and lower-yielding currencies like the yen.
Government bonds, which usually perform well when there is a
dash for safe havens, have come under intense pressure, sending
10-year Treasury yields towards one-month highs above 3.603%. The U.S. military said on Sunday it is searching for
remnants of the suspected Chinese surveillance balloon it shot
down a day earlier, while Beijing on Monday urged Washington not
to escalate matters.
Turkey's under-pressure lira hit record lows after a
powerful earthquake struck Turkey and Syria on Monday, killing
over 1,400 people. The currency sank after data last week showed
a worryingly large monthly rise in consumer inflation.
Friday's U.S. data showed 517,000 jobs were created in
January, well above expectations for 185,000, while revisions
for 2022 figures led to nonfarm payrolls increasing by 586,000
for the year. Deutsche Bank strategist Jim Reid called the
report "astonishing".
By Monday, the dollar had touched a three-week high of
132.60 against the lower-yielding yen following
reports the Japanese government had offered the job of central
bank governor to current deputy Masayoshi Amamiya, viewed as
less of a monetary policy hawk than his predecessor.
The dollar was last up 0.7% on the day at 132.08 yen,
pushing up its index by 0.13% to 103.26 , which jumped
1.2% on Friday. The euro fell 0.2% to $1.077 , while
sterling was flat against the dollar at $1.205 and up
0.2% against the euro at 89.40 pence.
The MSCI All-World share index was down 0.6%
on the day, driven in part by a 0.9% fall in European blue-chips
as the STOXX 600 came under pressure.
BALLOONING DRAMA
The drama over the balloon, which Beijing reiterated was a
civilian airship that accidentally strayed into U.S. airspace,
has further strained already-tense relations and led Washington
to cancel a planned visit to Beijing by Secretary of State
Antony Blinken.
Chinese equities fell on Monday, while the offshore yuan touched a one-month low against the dollar. It has fallen
by almost 2% in the space of three days.
"Undoubtedly, the incident is a negative headline for the
market," said Yuan Yuwei, hedge fund manager at Water Wisdom
Asset Management. "The strong U.S. jobs report also cooled the
fever of 'rate pivot' perceptions, leading to a surging dollar
and a declining yuan."
Deutsche Bank's Reid said diplomatic tensions between the
two countries would be worth watching this week. "We will see if
there is any retaliation and/or how strong the rhetoric is."
S&P 500 futures and Nasdaq futures fell between 0.7-0.9% after January's payrolls report saw investors price in the risk of more hikes from the Federal Reserve, and less chance of cuts later in the year. The dollar's strength also washed through emerging markets. The lira bore much of the brunt of the risk-off mood, falling to a record low of 18.85 to the dollar, while the Thai baht posted its biggest one-day fall against the U.S. currency in over 20 years. "The tragic events with the southern part of Turkey being hit by powerful earthquake is source of additional uncertainty ahead of crucial elections that most likely are going to be held in May," Piotr Matys, senior FX analyst at In Touch Capital Markets, said. "More importantly, the U.S. payrolls published last Friday indicated that the Fed is likely to remain in a tightening mode for longer then the markets currently anticipate at a time when President Erdogan strongly indicated he expects the Turkish central bank to cut interest rates," he said.
CENTRAL BANKER DELUGE A host of Fed officials are set to speak this week, led by Chair Jerome Powell on Tuesday, and the tone could be hawkish. European Central Bank and Bank of England policymakers will also be making appearances. Futures are almost fully priced for a quarter point U.S. rate rise in March, and likely another in May, leaving the peak at 5.0% from 4.9% ahead of the jobs data. Oil futures rose on Monday, having lost 3% post-payrolls. Brent edged up 0.4% to $80.30 a barrel, while U.S. crude gained 0.3% to trade at $73.60 a barrel. An energy official told Reuters on Monday there had been no damage to two of Turkey's key oil pipelines and flows were continuing after the earthquake. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Asia stock markets Asia-Pacific valuations ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Bansari Mayur in Bangalore, Karin Stohecker in London and by Wayne Cole in Sydney; Editing by Shri Navaratnam, John Stonestreet and Chizu Nomiyama)
