Asian stocks saw a decline, reaching a three-week low, and Hong Kong’s Hang Seng index plummeted to its lowest in a year. Concurrently, bonds and the dollar stabilized as investors recalibrated expectations concerning potential U.S. interest rate cuts while anticipating U.S. job data.

The Australian dollar faced a 0.6% drop post the central bank’s anticipated decision to keep interest rates unchanged, emphasizing the pivotal role of future rate decisions dependent on forthcoming data.

In the late afternoon trade, MSCI’s comprehensive index of Asia-Pacific shares, excluding Japan, witnessed a 1% decline, mainly propelled by Hong Kong’s substantial 1.6% fall.

The Hang Seng index’s drastic descent, down over 17% for the year, contrasts with the global stock index’s nearly 15% increase. Investors’ migration away from Chinese assets amid the country’s economic struggles underpins this divergence.

Japan’s Nikkei encountered a 1.4% drop to a three-week low, primarily influenced by declining chipmaking stocks. Meanwhile, S&P 500 futures slipped by 0.2%, and European futures remained relatively stable.

Gold, hovering above $2,000, experienced a volatile Monday session, reaching a record high in Asia before retracting significantly.

Bank of Singapore strategist Moh Siong Sim commented on the market’s expectations, stating, “The market has more or less priced the soft landing scenario (for the U.S. economy) to perfection. Overnight there was a bit of a reality check — maybe it was too ambitious.”

In Asian trade, Treasury yields underwent marginal pressure after traders previously adjusted expectations for U.S. interest rate cuts. Two-year yields rose by 9.1 basis points, holding steady at 4.62%.

Following a favorable inflation report three weeks ago, futures indicate an estimated 125 basis points of cuts in 2024.

Upcoming data on U.S. job openings scheduled at 1530 GMT and broader hiring figures expected later in the week will offer further insights into the job market’s status, especially after last month’s indications of a slowdown.

ANZ analysts, acknowledging recent inflation improvements, anticipate a hawkish policy stance from the Fed due to the persistent robust momentum in the economy.