• Asia-Pacific shares remain depressed amid fresh bout of risk aversion.
• US blew China’s balloon, canceled Secretary of State Antony’s visit to Beijing.
• Upbeat US jobs report, ISM Services PMI numbers propel yields.
• Risk catalysts are the key to clear directions.

Market sentiment remains sour as fears emanating from the bloc leader China, as well as from the US Federal Reserve (Fed), underpins the latest rebound in the US Treasury bond yields and weigh on equities. While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan slumps 2.0%. However, Japan’s Nikkei 225 rises to a fresh high in seven weeks.

It should be noted that stocks in China are the most negative, followed by those from Hong Kong. The weekend headlines suggesting the US military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina weighed on the sentiment as US Secretary of State Antony Blinked called off his previously planned visit to Beijing following the event. In a reaction to the event, China President Xi Jinping termed this as an ‘obvious overreaction’ while also warning to not aggravate the tense situation.

Elsewhere, stocks in Australia and New Zealand also portray mild losses while tracking China whereas Indian equities bear the burden of the Adani stock rout. Furthermore, Indonesia’s IDX Composite drops 0.70% despite firmer Gross Domestic Product (GDP) figures for the fourth quarter (Q4).

On a broader front, S&P 500 Futures extend the previous day’s pullback from the highest levels since August, down 0.30% intraday near 4,140 by the press time. On the same line, the US 10-year Treasury bond yields remain firmer for the third consecutive day, to 3.56% by the press time, following the biggest weekly jump since late September 2022.

Also to note is that Friday’s upbeat US jobs report and activity numbers renewed hawkish bias towards the Federal Reserve (Fed) and underpinned the recovery in the US Treasury bond yields, which in turn weighed on the market’s mood. Also likely to probe the sentiment could be the cautious mood ahead of Fed Chairman Jerome Powell’s speech on Tuesday, as well as the market’s chatters that China's stimulus will be limited.

That said, the US Dollar Index (DXY) extends the previous weekly rebound from the lowest levels since April 2022, despite being sluggish of late, while prices of Crude oil remain pressured but those of Gold improve amid the risk-off mood.