Business Maverick

Business Maverick

Asian stocks tread water as traders await payrolls: markets wrap

Asian stocks tread water as traders await payrolls: markets wrap
The rate of the US dollar against the yen displayed on an electronic stock board outside a securities firm in Tokyo, Japan, on Thursday, May 2, 2024. (Photo: Toru Hanai/Bloomberg)

Asian stocks fluctuated as markets awaited a key US jobs reading that’s likely to guide the Federal Reserve’s policy outlook. 

The MSCI Asia Pacific Index was little changed as shares in South Korea and Australia rose, while those in Japan and China traded weaker. Futures contracts for US stocks were steady as traders refrained from big bets ahead of US nonfarm payrolls data. The dollar was little changed, while US Treasury yields edged higher.

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. Global stocks are on track for their first weekly gain in almost a month, while a Bloomberg gauge of global government bonds posted its longest rising streak since November on Thursday.

“Asian markets will likely sit on the sidelines today, taking cues from the flat US market overnight,” OCBC strategists including Selena Ling said in a note. “The focus will be on the US’ May nonfarm payroll report.”

In Asia, markets will be paying close attention to Chinese trade data later on Friday as trade partners’ concerns of overcapacity in the nation’s manufacturing sector may cause them to slap tariffs 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.  

Investors will also be monitoring the Indian rupee as the nation’s central bank meets to decide interest rates, with economists seeing borrowing rates unchanged. 

The RBI can’t ignore the market’s negative reaction after Prime Minister Narendra Modi’s narrow election victory, but it’s unlikely to cut its rate on Friday, Bloomberg Economics’ Abhishek Gupta wrote in a note. “Cutting rates now – ahead of any reductions by the Federal Reserve — risks triggering capital outflows, which the RBI wants to avoid.”

Elsewhere in Asia, more than a half of surveyed Bank of Japan watchers have forecast 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. 

Attention will then turn to the looming US jobs print, which is expected to show the US added 180,000 jobs in May while the unemployment rate held steady. In the run-up to the reading, US data included jobless claims that topped estimates and labor costs which increased by less than previously reported. Swap markets continued to pencil in the start of the Fed rating cut in November, with a strong likelihood it begins in September. 

“We expect the overall message from the non-farm payrolls report to be one of strength, albeit ebbing,” said Joseph Capurso, head of international economics at Commonwealth Bank of Australia in Sydney. “Consequently, market pricing for the FOMC’s first rate cut in September may be pushed out, supporting a modest increase in the US dollar.” 

Oil rose Friday, set for a third straight gain, as expectations waned that OPEC and its allies will allow the market to become oversupplied. Gold was little changed.

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted