Asian shares struggled for direction while the yen jumped on Friday, as investors remained on tenterhooks ahead of U.S. jobs data that could decide the size and speed of coming rate cuts in the world’s largest economy.
Oil prices are staring down their worst week in more than a year to hover just above a critical chart level, with their near-term fate depending on the payrolls report due later in the day.
Europe is set for a lower open, with both EUROSTOXX 50 futures and FTSE futures off 0.2%. Nasdaq futures skidded 0.5% while S&P futures slipped 0.2%.
There is a lot riding on the U.S. non-farm payrolls report after the Federal Reserve Chair Jerome Powell said policymakers do not welcome any further weakening in the labour market, laying the ground for imminent rate cuts.
Analysts are looking for new jobs to rise by 160,000 and for the unemployment rate to dip to 4.2%. But a recent run of softer partials suggests risks are to the downside, fuelling speculation of an outsized half-point rate cut on Sept. 18.
ING said even if the payrolls come in line with expectations, markets might still scale back the chance of a 50 basis point cut.
“We suspect the market is actually positioned for a sub-100k number. If we don’t get that type of validation for material slowdown, yields will be under pressure to rise for a bit,” said Padhraic Garvey, regional head of research, Americas, at ING.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.2% higher, heading towards a 2.8% drop for the week. Taiwanese shares outperformed on the day with a gain of 1.1%, while Chinese blue-chips fell 0.4%.
The Nikkei dropped 0.7% as the yen jumped, weighing on the outlook for Japanese exports. The index is down about 4% this week.
The Japanese yen rose 0.6% to 142.57 per dollar, bringing the weekly gain so far to 2.5%, although a strong payrolls report could see it wipe out those gains.
Kristina Clifton, an economist at the Commonwealth Bank of Australia, noted that market caution in the lead up to the U.S. payrolls report has driven safe haven flows into the yen.
Influential Fed governor Christopher Waller and New York Fed President John Williams will be speaking after the jobs data, offering investors some immediate clarity.
Treasury yields slipped on Friday, extending their declines this week. Two-year Treasury yields fell 18 basis points so far this week to 3.7268%, around the lowest since early 2023.
Ten-year yields were down 20 bps to 3.7080%, with the spread over two years on the verge of turning positive.
Oil is facing the worst week since October 2023 as demand worries weighed against a big withdrawal from U.S. inventories and a delay to output increases by OPEC+ producers.
The supply issues failed to elicit a jump in crude prices. Brent crude futures steadied on Friday at $72.68 a barrel, but were down 8.3% so far in the week.
They were pinned near a key range of $70 to $71, a break of which would open the way to levels not seen since late 2021.
Gold egded 0.1% higher at $2,519 an ounce, just a touch below its record high.
(Reuters)