Asian stocks frightened by sudden drop in gold

SYDNEY (Reuters) – Asian stocks faltered on Monday amid steep losses in gold and oil prices, while the dollar held close to its four-month highs after an optimistic report on the employment in the United States pushed bond yields up.

Sentiment was shaken by a sudden drop in gold as a breakout of $ 1,750 triggered stop-loss sales taking it to $ 1,684 an ounce. It was down 2.2% for the last time at $ 1,723.

Brent fell nearly 2% on fears that the spread of the Delta variant would dampen travel demand.

The holidays in Tokyo and Singapore created difficult trading conditions, leaving the MSCI’s largest Asia-Pacific stock index outside of Japan down 0.1%.

Japan’s Nikkei was closed but futures were trading just below Friday’s close. Nasdaq futures slipped 0.5% and S&P 500 futures slipped 0.3%.

Chinese trade data released over the weekend has beaten expectations, although figures due later Monday should show inflation is not a barrier to further stimulus.

The US Senate was set to pass a $ 1 trillion infrastructure package, though only one Republican lawmaker suspended a vote on Sunday.

Investors were still assessing whether Friday’s strong US payroll report would allow the Federal Reserve to take one more step toward withdrawing its stimulus measures.

“There isn’t much disagreement over a cut announcement between September and December followed by an actual cut between November and January,” said Rodrigo Catril, senior currency strategist at NAB.

However, the pace of the cut was still on hold and would decide when a real rate hike would take place, he said. The Fed currently buys $ 120 billion in assets per month, so a $ 20 billion cut would end the program in six months while a $ 10 billion cut approach would take a year.

The spread of the Delta variant could argue for a longer slowdown, with US cases returning to levels seen in last winter’s outbreak with more than 66,000 people hospitalized.

The July CPI figures due this week should also confirm that inflation has peaked, as used vehicle prices finally came down after huge gains.

Four Fed officials are speaking out this week and will no doubt offer their own take on tapering.

Meanwhile, stocks have been mostly supported by a strong earnings season in the US. BofA analysts noted that companies in the S&P 500 were following a 15% gain on second-quarter earnings, with 90% reporting.

“However, companies whose earnings exceeded expectations experienced mixed reactions to their stock prices the day after the results were released, and the hiccups were penalized,” they wrote in a note.

“The forecast is stronger than average, but consensus estimates for two-year growth suggest a slowdown amid macroeconomic concerns.”

Financials strengthened on Friday as a steeper yield curve is seen to benefit bank earnings, while also penalizing the tech sector where valuations are very high.

US 10-year bond yields rose 1.30% on the jobs report, after hitting their lowest since February last week at 1.177%.

The jump gave the dollar a big blow and pulled the euro down to $ 1.1744, its lowest since April. The dollar also climbed to 110.28 yen and moved away from last week’s low of 108.71.

This brought the US currency index to 92.882 and closer to the July high of 93.194.

Oil prices have fallen further after suffering their biggest weekly drop in four months, fearing coronavirus-related travel restrictions threaten upward demand expectations. [O/R]

Brent lost $ 1.30 to $ 69.40 a barrel, while US crude lost $ 1.29 to $ 66.99.