Asian Stocks to Echo US Drop Ahead of Jobs Data: Markets Wrap

Posted by Admin December 5, 2024 Jobs

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(Bloomberg) — Asian equities were primed for declines Friday after US stocks fell for the first time in five sessions ahead of jobs data that will help determine whether the Federal Reserve will cut interest rates in December.

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Equity futures for Japan, Australia and Hong Kong all fell, taking cues from the downbeat mood on Wall Street. The S&P 500 dropped 0.2% and the tech-heavy Nasdaq 100 declined 0.3%.

Treasuries held to muted moves on Thursday with front-end yields rising and those at the long-end falling. Swap trading showed the implied odds of a quarter-point Fed cut this month is around 65%. The dollar slipped against other major currencies with the yen and euro strengthening. Australian and New Zealand bond yields climbed early Friday.

The moves signal caution ahead of Friday’s nonfarm payrolls data after bouts of political turmoil in Asia and Europe have triggered a wave of volatility across currency markets but failed to jolt stocks. US jobless claims rose to a one-month high on Thursday, while economists estimate payrolls rose by 220,000 in November, rebounding after two hurricanes and a strike lowered October numbers.

“We’ll get a fuller picture,” after Friday’s jobs data, said Chris Larkin at E*Trade from Morgan Stanley. “But for now, the story continues to be a labor market that occasionally appears to bend, but avoids breaking.”

In Europe, a measure of France’s bond risk fell amid hopes lawmakers will strike a deal on next year’s budget sooner than many investors had expected. French President Emmanuel Macron said he will serve out the remainder of his presidential term as he seeks to quickly stymie the political turmoil.

Elsewhere, South Korea is planning measures to boost after-hours liquidity in the won, after this week’s political crisis triggered a surge in volatility in the currency.

In commodities, oil inched lower in a choppy session after OPEC+ deferred supply increases for three months, but still plans to add barrels next year to a market that’s expected to be oversupplied. Meanwhile, Chevron Corp. said it plans to slow production growth in the biggest US oil field next year. Gold also fell.

Bitcoin pared a rally that earlier drove digital asset past $100,000 buoyed by President-elect Donald Trump’s pick of a crypto proponent to be the next head of the US securities regulator.

In Asia, data set for release includes inflation for Vietnam, an interest rate decision in India and foreign reserves for Malaysia. November reserves data for China may also be released as soon as today.

Rates Outlook

A stronger headline US nonfarm payroll figure would be warmly welcomed by markets, supporting a theme of normalization rather than a deterioration on the jobs front, according to Oscar Munoz and Gennadiy Goldberg at TD Securities.

“We expect a stronger reading to initially lead to a significant bear-flattening reaction, but see a likelihood that the initial knee-jerk is pared back after markets assess the details,” they noted. “We remain buyers of duration on dips and will look to higher yields as a possible entry point to reestablishing longs.”

A survey conducted by 22V Research shows that 45% of investors believe Friday’s US payrolls data will be “mixed/negligible,” 32% said it will be “risk-off,” and 23% “risk-on.”

Leading indicators point to a roughly as-expected reading in the payrolls report, with headline job growth potentially coming in somewhere in the 180,000-240,000 range, albeit with a big band of uncertainty given the current global backdrop, according to Matthew Weller at Forex.com and City Index.

“With an interest-rate cut largely priced in at this point, the risks may be skewed slightly toward a bounce in the greenback if the jobs report revives the odds of a December pause,” Weller noted. “Though any market moves might be limited as the Fed’s policy decision is more around when rather than if it will pause rate cuts in the near future.”

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