Asia-Pacific Stocks Mostly Lower as Promise of New US Fiscal Stimulus Stokes Global Reflation Trade

The major Asia-Pacific stock indexes were mostly lower on Monday as profit-takers came in after last week’s strong performance. Driving the price action was a surge in Treasury yields to a 10-month high. Investors were also increasing bets on “trillions” in new U.S. fiscal stimulus plans that were set to be unveiled this week as part of President-elect Joe Biden’s economic recovery program. Rising rates are also stoking the global reflation trade.

In the cash market on Monday, Hong Kong’s Hang Seng Index settled at 27908.22, up 30.00 or +0.11 and South Korea’s KOSPI Index finished at 3148.45, down 3.73 or -0.12%.

China’s Shanghai Index settled at 3531.50, down 38.61 or -1.08% and Australia’s S&P/ASX 200 closed at 6697.20, down 60.70 or -0.90%.

The markets in Japan were closed on Monday for a bank holiday.

Price Action Driven by Rising US Yields

Longer-term U.S. Treasury yields were at their highest since March after Friday’s weak jobs report only fanned speculation of more U.S. fiscal stimulus now that the Democrats have control of the government.

President-elect Joe Biden is due to announce plans for “trillions” in new relief bills this week, much of which will be paid for by increased borrowing.

At the same time, the Federal Reserve is sounding content to put the onus on fiscal policy with Vice Chair Richard Clarida saying there would be no change soon to the $120 billion of debt the Fed is buying each month.

With the Fed reluctant to purchase more longer-dated bonds 10-year Treasury yields jumped almost 20 basis points last week to 1.12%, the biggest weekly rise since June.

Apple, Hyundai Set to Agree Electric Car Tie-Up, says Korea IT News

Hyundai Motor and Apple Inc plan to sign a partnership deal on autonomous electric cars by March and start production around 2024 in the United States, local newspaper Korea IT News reported on Sunday.

The report follows a statement on Friday from Hyundai Motor that it was in early talks with Apple after another local media outlet said the companies aimed to launch a self-driving electric car in 2027, sending Hyundai shares up nearly 20%.

Hyundai Motor declined to comment on the report on Sunday, and reiterated Friday’s comments that it has received requests for potential cooperation from various companies on developing autonomous EVs.

China Inflation News

China’s Producer Price Index fell 0.4% in December as compared to a year earlier, according to the country’s Bureau of Statistics. That was a smaller decline than the 0.8% fall expected in a median forecast of a Reuters poll. Meanwhile, China’s Consumer Price Index rose 0.2% year-on-year in December, against expectations of a 0.1% increase in a Reuters poll.

Gold Miners Drag Down Australian Shares

Australian shares settled lower on Monday as cases of highly transmissible new COVID-19 variants dimmed hopes for a quick economic recovery, with gold miners leading the retreat on bullion sell-offs.

With New South Wales eased lockdown measures introduced to contain an outbreak in its northern coastal suburbs, health officials said over the weekend that they were on high alert after cases of the COVID-19 variants discovered in Britain and South Africa were identified in the country.

Gold stocks dropped as bullion prices slumped to a near six-week low on a firmer U.S. Dollar and higher Treasury yields. Newcrest Mining gave up 3.6% and AngloGold Ashanti eased 4.3% to be the biggest drags on the sub-index.