Asian Stocks to Fall, Yen Climbs Ahead of US Jobs: Markets Wrap

Posted by author February 6, 2025 Jobs

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(Bloomberg) — Asian stocks headed for early declines Friday after muted moves on Wall Street as traders awaited US jobs data that will help illuminate the path ahead for interest rates.

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Equity futures for Australia, Hong Kong and Japan all fell, with the latter partly weighed by a stronger yen. The Japanese currency strengthened against the greenback for a fourth day to around 151 per dollar, the highest level since early December. Prime Minister Shigeru Ishiba will meet with US President Donald Trump on Friday.

The S&P 500 closed 0.4% higher, while the Nasdaq 100 added 0.5% on Thursday. Shares in Amazon.com Inc fell in after-hours trading following earnings results that showed projected profits for the current quarter below analysts’ estimates. The shortfall indicates the company continues to ramp up spending to support artificial intelligence services.

Treasuries were slightly lower across the curve Thursday. An index of the dollar tracked against a basket of currencies was little changed.

The moves signal a dose of calm ahead of nonfarm payroll figures due later Friday that will refocus traders away from the drama over tariffs earlier in the week that initially rattled financial markets.

Friday’s jobs report is expected to show 175,000 new roles added to the US economy. A weak print could boost expectations for further Federal Reserve cuts, while a stronger-than-expected number may have the opposite effect.

Separate jobs data released Thursday showed initial jobless claims picked up while labor productivity remained robust. In addition to the employment print Friday, Wall Street will be closely watching a revision to job growth. Economists predict that will be substantial, but probably not as bad as initially estimated.

“Fridays’ jobs report is important for markets because if it’s Goldilocks, it’s going to help support the market amidst all this tariff and policy noise,” said Tom Essaye at The Sevens Report. “However, if it’s not Goldilocks, it’s going to add another headwind on risk assets and likely pressure stocks.”

The British pound fell as the Bank of England lowered interest rates, with two officials supporting a 50-basis-point cut that prompted markets to boost bets on further easing. But the central bank also halved its growth forecast for this year to 0.75% and projected much stronger inflation than expected.

Elsewhere, Treasury Secretary Scott Bessent reiterated his view on a lower path for 10-year yields under the Trump administration. Bessent said there has been no “tinkering” with the Treasury department’s payment systems by Elon Musk’s government efficiency team and added that their work would lead to significant savings.

In Asia, data set for release includes household spending for Japan, outright bond purchases for the Bank of Japan, inflation for Taiwan and a rate decision in India. Consensus forecasts indicate the Reserve Bank of India will cut its benchmark repurchase rate 25 basis points to 6.25%, but some analysts say there is a chance the RBI could cut by twice that amount.

Revision Risk

Every year, the January employment report from the Bureau of Labor Statistics comes with revisions for the 12 months through the previous March. Those adjustments traditionally don’t get much attention. But this week they will, because the agency’s preliminary estimate in August suggested the downward revision would be 818,000 — the largest since 2009.

Economists expect the actual markdown in the January report due Friday will probably come to around 600,000 to 700,000 jobs, which would be somewhat of a relief. The standard monthly jobs data is expected to show payrolls increased by 175,000 last month after advances in excess of 200,000 in the prior two months — which partly reflected recovery from two severe hurricanes.

For Fed officials, the expected outcome of the January jobs report and the benchmark revisions will likely be consistent with their view that labor demand is moderating, though still strong enough to underpin the economy.

“As long as Friday’s jobs report shows that the economy added 170,000-200,000 jobs during the month, the market should largely absorb this number with little volatility,” said Gaurav Mallik at Pallas Capital Advisors. “If we see a number much stronger than this, it could remove the prospects of any rate cuts this year, and if it’s a number much lower, it could raise worries about a weakening labor market.”

Fed Chair Jerome Powell said last week officials want to see more progress on inflation and would be looking for “serial readings” showing price pressures moving in the right direction.

For now, traders still see the Fed’s next move as a cut — although likely not until mid-year. Treasury yields hit 2025 lows this week.

In corporate news, Qualcomm Inc. sank on fears demand for new handsets will stall. A bullish outlook lifted Peloton Interactive Inc. while Philip Morris International Inc. hit a record high on solid sales of Zyn nicotine pouches. Ford Motor Co. sank amid a profit warning.

In commodities, gold retreated from a record high Thursday, declining for the first time in six sessions. Oil fell as Trump’s renewed pledge to drive down the price of crude overshadowed his push for tighter Iranian sanctions.

Key events this week: