(Bloomberg) — Asian stocks regained some ground after a global selloff as traders awaited this week’s US payrolls data to gauge the extent of the Federal Reserve’s easing.
Most Read from Bloomberg
The MSCI Asia Pacific Index rose 0.8% after falling more than 2% on Wednesday, its biggest drop since the Aug. 5 rout. South Korea’s Kospi and Taiwan’s Taiex index jumped more than 1%, led by a rebound in the shares of chipmakers. Benchmarks in China and Hong Kong opened higher.
Treasuries were steady after the 10-year yield dropped eight basis points in the prior session, as a slowdown in the US labor market bolstered bets on steep rate cuts by the Fed. An index of dollar strength slipped after weakening by 0.3% on Wednesday. The yen, earlier supported by an increase in Japan’s real wages, pared gains.
Global financial markets have displayed outsized reactions to US economic data as doubts grow over the Fed’s ability to engineer a soft landing. Skepticism over the artificial intelligence hype has also hurt risk assets, with Nvidia Corp. seeing its worst two-day plunge since October 2022. Focus now turns to the US payrolls data due Friday, one of the most important data points before the Fed’s decision later this month.
“Financial markets remain in a cautious mood in the lead up to the US payrolls report which can make or break the case for a 50bp FOMC cut,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. “USD/JPY will be particularly vulnerable to the downside to signs of a deterioration in the US labor market because of the divergent monetary policy paths between the FOMC and the Bank of Japan.”
US futures edged higher in Asian trading after the S&P 500 and Nasdaq 100 ended Wednesday down 0.2%.
Shares of Nippon Steel Corp. snapped a three-day drop. The Japanese steelmaker is in focus after US President Joe Biden was said to block its $14.1 billion takeover of United States Steel Corp.. Shares of US Steel closed 17% lower in New York, the biggest decline since April 2017.
Elsewhere, China is considering cutting interest rates on as much as $5.3 trillion of mortgages as authorities attempt to shore up the battered property market. Investor sentiment remains poor with JPMorgan Chase & Co. dropping its buy recommendation for the nation’s stocks, citing weak policy support and potential volatility linked to the US presidential election.
“There is insufficient policy support, both monetary and fiscal,” Claudio Irigoyen, head of global economics research for Bank of America, said on Bloomberg Television. “It is going to be more difficult to achieve the targets of 5% unless we have more policy support.”
With the Fed set to begin cutting rates in a few weeks, monthly US employment data due Friday will help determine how big the move will be. Chair Jerome Powell has made it clear the Fed is now more concerned about risks to the labor market than inflation.
“Markets seem to see September as a coin flip between 25 and 50 basis points,” said Neil Dutta at Renaissance Macro Research. “I think going 25 basis points risks the same market dynamic as skipping the July meeting. It’ll be fine until the next data point makes investors second guess the decision, fueling bets the Fed is behind the curve. Go 50 when you can, not when you must.”
In commodities, oil rose after closing at the lowest level since June 2023 as an industry report pointed to a big draw in US crude stockpiles. Meanwhile, gold traded at around $2,495 after finding support following the US job openings data.
Key events this week:
-
Eurozone retail sales, Thursday
-
US initial jobless claims, ADP employment, ISM services index, Thursday
-
Eurozone GDP, Friday
-
US nonfarm payrolls, Friday
-
Fed’s John Williams speaks, Friday
Some of the main moves in markets:
Stocks
-
S&P 500 futures rose 0.1% as of 10:45 a.m. Tokyo time
-
Japan’s Topix rose 0.6%
-
Australia’s S&P/ASX 200 rose 0.4%
-
Hong Kong’s Hang Seng rose 0.3%
-
The Shanghai Composite rose 0.1%
-
Euro Stoxx 50 futures were unchanged
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro was little changed at $1.1084
-
The Japanese yen was little changed at 143.68 per dollar
-
The offshore yuan rose 0.2% to 7.0971 per dollar
Cryptocurrencies
-
Bitcoin rose 0.2% to $58,149.78
-
Ether rose 0.3% to $2,463.62
Bonds
-
The yield on 10-year Treasuries advanced one basis point to 3.76%
-
Japan’s 10-year yield declined 1.5 basis points to 0.870%
-
Australia’s 10-year yield declined three basis points to 3.92%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
Read the full article here