(Updates prices as of 0652 GMT)
By Kevin Buckland
TOKYO, Jan 5 (Reuters) – Asian stocks wobbled on Friday, keeping global equities on track to snap a nine-week winning streak, while the dollar was poised for its strongest weekly advance since mid-May as bets on aggressive Federal Reserve rate cuts were rolled back.
The dollar’s gains were particularly pronounced against the yen, and it surged beyond the closely watched 145 mark on the day, buoyed by long-term Treasury yields above 4%.
MSCI’s broadest index of Asia-Pacific shares outside Japan sagged 0.49% as of 0652 GMT, with Hong Kong’s Hang Seng slipping 0.8% and mainland Chinese blue chips falling 0.62%.
The MSCI world index was about flat so far on the day, but heading for a 1.78% decline this week.
“A weak opening to equity markets in 2024 suggests that investors are experiencing a hangover after December’s exuberance, waking up to the reality that the optimistic upturn may have been too much too soon,” said Lewis Grant, senior portfolio manager for global equities at Federated Hermes Limited.
“Macro sensitivity remains at the forefront of investors’ minds,” he said. “Uncertainty remains, and much will be riding on the first few economic releases of 2024.”
The latest catalyst for a paring of Fed rate-cut bets came from more resilient U.S. labour market data on Thursday, putting less pressure on the central bank to race to ease policy.
Fed officials have sounded more balanced on the risks in recent comments, with Richmond Fed President Thomas Barkin, for one, saying this week that the central bank is “making real progress” towards taming inflation, but “the potential for additional rate hikes remains on the table”.
Traders now see a little better than 2-in-3 odds that the Fed cuts rates by March, down from a 71% probability a week earlier, according to the CME Group’s Fedwatch tool.
The release of monthly U.S. payrolls figures looms large later in the day.
Overnight, Wall Street’s S&P 500 retreated 0.34%, taking its losses this week to 1.7%, setting up its first weekly decline since late October. Futures pointed to a further 0.11% drop at the reopen.
Pan-European STOXX 50 futures sagged 0.69% and U.K. FTSE futures shed 0.63%.
Japan’s Nikkei was something of an outlier, bouncing 0.27% as exporters got a boost from the yen’s slide. The dollar last traded 0.42% stronger at 145.25 yen, and touched 145.365 for the first time since Dec. 13.
A deadly New Year’s Day quake on the Japan Sea coast has forced the last wagers for a hawkish Bank of Japan policy shift at this month’s meeting off the table.
“The Bank of Japan’s continued reluctance to give a timetable for normalisation is running up against the Fed’s pushback on the aggressive rate-cut path the market was pricing in a week ago,” said James Kniveton, senior corporate forex dealer at Convera.
“That has seen the dollar climb against the yen as the interest rate differentials reassert themselves.”
The U.S. dollar index, which measures the currency against a basket of six major peers including the yen, added 0.18% to 102.61, pushing back towards Wednesday’s three-week high of 102.73. For the week, it is up 1.22%.
The 10-year Treasury yield rose as high as 4.023%, and was last as 4.0135%, up about 15.5 basis points over the week.
Meanwhile, gold was about flat at $2,043 per ounce, on track to snap a three-week winning streak with a 0.91% slide so far in 2024.
Oil ticked higher following declines on Thursday, when massive weekly gasoline and distillate stock builds overshadowed a larger-than-expected crude stock draw.
Brent crude futures were up 0.55% at $78.02 per barrel, after settling down 0.8% overnight. U.S. West Texas Intermediate crude futures added 0.72% to $72.72 on Friday following a 0.7% decline in the previous session.
For the week, Brent is up 1.18%, while WTI has gained 1.38%.
(Reporting by Kevin Buckland; Additional reporting by Ankur Banerjee; Editing by Jamie Freed and Muralikumar Anantharaman)
