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Nikkei Markets

Asian stocks tumble after US jobs data damp hopes of deeper Fed rate cuts

Samsung Electronics, SK Hynix, LG Electronics key losers on A300

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan tumbled Monday after a robust U.S. jobs report prompted investors to scale back expectations of a 50 basis-points rate cut by the Federal Reserve this month.

The Nikkei Asia300 Index of companies outside Japan declined 1.7% to 1,308.57. Heavyweight Samsung Electronics fell 2.7%, adding to Friday's 0.8% decline following disappointing June quarter earnings guidance. Its peer SK Hynix slipped 1.5%. LG Electronics slid 1.5% after reportedly saying that April-June operating profit likely declined 15.4% from a year ago. South Korean equities were further affected by the uncertainty over Japan's export restrictions, analysts said.

Asian equities and currencies declined after data showed that the U.S. economy added a robust 224,000 jobs last month. That was up significantly from the downwardly revised 72,000 in May and better than the 160,000 expected by economists polled by Reuters.

With Friday's job additions being the last employment data the Fed will see before this month's meeting, it was closely watched by investors to gauge the likelihood of how much the U.S. central bank would ease interest rates at the July 30-31 meeting.

Following the upbeat jobs report, Fed fund futures indicated that now there was a negligible chance of a 50 basis-point rate cut and the Fed, in most likelihood, would cut rates by quarter percentage points. Late last month, odds of half a percentage point rate reduction had climbed to above 40% at one point amid growth outlook worries.

ING Bank said that the encouraging jobs report suggests the broad economy is shrugging off the US-China trade uncertainty, and while the Fed is gearing up for precautionary interest rate cuts (a quarter percentage rate cut in July and another in September), the market at present is "expecting too much."

The dollar index jumped Friday, the 10-year Treasury yield climbed back above 2%, and the U.S. equities slipped from record highs.

On the A300, Chinese carmakers were the other losers on Monday. Dongfeng Motor Group fell 0.9% after sales volume remained almost flat last month from a year earlier. BYD declined 2% and Great Wall Motor slipped 1%. BYD reported a 3.1% increase in total sales volume and Great Wall a 5.6% rise.

HTC advanced 4%. The Taiwanese company reported that sales last month were down 34.5%, compared with the 69.2% decline in May. Hon Hai Precision Industry closed 1% higher following a 1.7% increase in sales in the same month

Largan Precision advanced 4.2%. The lens supplier to Apple reported a 9.6% fall in sales in June.

--Nimesh Vora

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