Markets mixed as US jobs data tempered by economy worries

Equities were mixed Wednesday as building optimism that the Federal Reserve will cut interest rates before the end of the year was offset by renewed worries about the US economy.

A below-forecast read on job openings Tuesday indicated the resilient labour market was showing signs of softening a day after a big downside miss on factory activity — suggesting a long-running period of high inflation and borrowing costs was taking its toll.

The figures come ahead of closely watched non-farm payrolls figures due Friday, which will provide a much clearer snapshot for the US central bank ahead of its policy decision next week.

Readings below forecasts have for some time been taken as a positive, because they were seen as pointing to an economy still in rude health but slowing enough to give the Fed room to start cutting rates — known as a “Goldilocks” situation.

However, some investors are getting uncomfortable.

“Recent economic reports have reinforced the notion that investors are increasingly looking beyond the ‘Goldilocks’ narrative toward something a bit more consistent with the flagging trajectory of consumption,” warned Ian Lyngen and Vail Hartman, of BMO Capital Markets.

“There is nothing to imply that the real economy is on the precipice of a recession… rather that a no-landing for the labour market appears less likely than it did during the first quarter.

“Goldilocks is edging toward the door, but has yet to leave the building.”

Still, bets on a Fed rate cut before the end of the year picked up, with some eyeing September as the lift-off point.

“The evidence is accumulating that the Fed should begin easing,” said Lazard strategist Ronald Temple.

All three main indexes on Wall Street pushed higher, and Asia largely tracked those gains in the morning but struggled in the afternoon.

Sydney, Seoul, Taipei, Manila and Wellington all enjoyed buying interest, though Hong Kong, Tokyo, Singapore, Shanghai, Bangkok and Jakarta were in the red.

Mumbai rose more than two percent after tanking Tuesday when it appeared that India’s Prime Minister Narendra Modi would not win as big an election victory as expected. 

Exit polls had suggested Monday he was on course for a landslide, but as votes were counted it emerged that he had lost his majority and would have to rule with a coalition.

London, Paris and Frankfurt also advanced as traders in the eurozone geared up for an expected rate cut by the European Central Bank later in the week.

Crude prices edged up after recent hefty losses as investors digest the OPEC+ alliance of major crude producers’ decision to begin winding back output cuts from October and through next year.

The decision comes as observers fret over demand for the commodity as data suggests US stockpiles are rising, while China’s economy is still struggling to get back on track owing to soft consumer activity and a battered property industry.

– Key figures around 0810 GMT –

Tokyo – Nikkei 225: DOWN 0.9 percent at 38,490.17 (close)

Hong Kong – Hang Seng Index: DOWN 0.1 percent at 18,424.96 (close)

Shanghai – Composite: DOWN 0.1 percent at 3,087.56 (close)

London – FTSE 100: UP 0.3 percent at 8,253.26

Dollar/yen: UP at 156.05 yen from 154.80 yen on Tuesday

Euro/dollar: DOWN at $1.0871 from $1.0883

Pound/dollar: UP at $1.2782 from $1.2772

Euro/pound: DOWN at 85.11 pence from 85.19 pence

West Texas Intermediate: UP 0.3 percent at $73.44 per barrel

Brent North Sea Crude: UP 0.2 percent at $77.70 per barrel

New York – Dow Jones: UP 0.4 at 38,711.29 points (close)

dan/rsc