Asian Stocks Set for Cautious Open as US Jobs Loom: Markets Wrap

(Bloomberg) — Asian stocks are poised for a tentative open as Wall Street wavered ahead of a key US jobs reading that will likely guide the interest rate outlook of the Federal Reserve.

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Equity futures in Australia and Hong Kong advanced modestly while those in Japan and mainland China slipped. The S&P 500 closed little changed, having stalled near all-time highs, as traders refrained from big bets ahead of the US non-farm payrolls data. Contracts for US shares were steady in early Asian trading.

In the run-up to the payrolls reading markets waded through a raft of US data, including jobless claims that topped estimates and labor costs which increased by less than previously reported. Friday’s report is expected to show the US added 180,000 jobs in May while the unemployment rate held steady.

A 22V Research survey shows there’s no consensus about the market reaction — with 36% of investors betting on a “risk-off” move, 33% saying “risk-on” and 31% “negligible/mixed.” The dollar rebounded to close steady on Thursday while the euro rose as the European Central Bank raised inflation forecasts after cutting rates. Treasuries wavered after this week’s rally.

“A slowing in the job market, and even an increase in unemployment, should be welcome to the extent that it alleviates some upwards pressure on inflation,” said Chris Zaccarelli at Independent Advisor Alliance. “But we are aware that too much weakness in the labor market and in the economy could eventually prove to be an even greater threat to markets than inflation.”

Traders have escalated rate-cut bets in the past week, emboldened by the slew of softer-than-forecast US data, the Bank of Canada’s decision to ease monetary policy, and bets the ECB would be the next to cut — a move confirmed on Thursday. Treasury 10-year yields fluctuated near 4.29% while swap markets continued to pencil in the start of the Fed rating cut in November, with a strong likelihood of another reduction in December.

Meantime, the yield on 10-year German bunds rose four basis points after ECB raised its inflation forecasts and officials all but ruled out a follow-up cut in July. ECB President Christine Lagarde said that while the inflation outlook has improved “markedly,” they’ll “keep policy rates sufficiently restrictive for as long as necessary.”

Story continues

In Asia, markets will be paying close attention to Chinese trade data later Friday as fears of overcapacity in the nation’s manufacturing sector may cause trade partners to slap tarrifs on its exports. Reserve Bank of Australia Deputy Governor Andrew Hauser is also due to speak after the nation’s growth almost stalled in the first quarter.

Elsewhere in Asia, more than a half of surveyed Bank of Japan watchers have forecasted that the central bank will trim its government bond buying when authorities meet next week, with a growing number also looking ahead to a rate hike in July.

Oil gained for a second session as expectations waned that OPEC and its allies will allow the market to become oversupplied. Gold advanced for a second session.

Key events this week:

• China trade, forex reserves, Friday

• Eurozone GDP, Friday

• US unemployment rate, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 7:33 a.m. Tokyo time

• Hang Seng futures rose 0.4%

• S&P/ASX 200 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0892

• The Japanese yen was little changed at 155.58 per dollar

• The offshore yuan was unchanged at 7.2593 per dollar

• The Australian dollar was little changed at $0.6670

Cryptocurrencies

• Bitcoin rose 0.2% to $70,817.91

• Ether rose 0.2% to $3,808.25

Commodities

This story was produced with the assistance of Bloomberg Automation.

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