TOKYO: Asian stocks tracked Wall Street’s rise to a record high and Treasury yields eased to four-month lows on Friday as traders cemented bets for the Federal Reserve to cut rates this month, even with crucial U.S. jobs data looming later in the day.
The U.S. dollar eased slightly, giving up small gains from Thursday, when it was buoyed by soft labour market figures.
Gold held steady after Thursday’s retreat from an all-time high.
Crude oil drifted lower for a third straight day as investors awaited an OPEC+ meeting this weekend that will consider further output hikes.
Markets are all but certain of a quarter-point cut at the conclusion of the Fed’s two-day rate-setting meeting on September 17, and price a cumulative 60 basis points of reductions this year.
On Thursday, data showed that the number of Americans filing new applications for unemployment benefits increased more than expected last week, while hiring by private employers slowed in August, further evidence that labor market conditions were softening.
Economists expect Friday’s non-farm payrolls report to show the economy added 75,000 jobs in August, not much above the 73,000 figure for July, that first set a fire under expectations for a near-term Fed rate reduction.
Fed Chair Jerome Powell later reinforced that speculation with an unexpectedly dovish speech at last month’s closely watched Fed symposium in Jackson Hole, Wyoming.
“Unless it’s an absolutely stellar payrolls print, it’s hard to see too much that’s going to change the market away from locking in a September cut,” said Ken Crompton, head of rates strategy at National Australia Bank.
“Beyond that, the terminal rate and how you get there, that’s arguably still up for grabs.”
Expectations of an easier monetary environment have supported global equities, and the S&P 500 rose 0.8% on Thursday to finish at a record high. The Nasdaq climbed 1% to just shy of its own all-time closing high from August 13.
S&P 500 futures pointed 0.1% higher on Friday, and Nasdaq futures advanced 0.3%.
Japan’s Nikkei rose 0.8% and Taiwan’s stock benchmark climbed 0.8%. Both those markets are close to recent record highs.
Hong Kong’s Hang Seng and mainland Chinese blue chips each added about 0.4%.
Australia stocks gained 0.3%.
“The non-farm payrolls data tonight is something of a sink or swim moment for the markets,” said Kyle Rodda, senior financial market analyst at Capital.com.
“The critical question is … whether the Fed is in the right position to lower rates and buffer the economy, or if it’s behind the curve,” he said. “Should the data point (to) an economy accelerating off a cliff, that could spark risk aversion and volatility.”
Long-end sovereign bonds globally have been the locus for volatility this week, amid worsening fiscal deficits from Washington to Brussels and London to Tokyo, often exacerbated by political instability.
However, a strengthening belief that the Fed will soon be cutting rates reined in sharp rises in bond yields mid-week.
Yields on 30-year Treasuries slipped to a three-week low of 4.8410% on Friday in Tokyo, while the 10- and two-year yields eased to four-month lows of 4.1530% and 3.5816%, respectively.
Japanese 30-year government bond yields sank to 3.235%, retreating for a second day from Wednesday’s all-time peak of 3.255%.
The U.S. dollar index , which measures the currency against six major peers, declined 0.1% to 98.095, giving back the ground it took on Thursday.
For the week though, it is up 0.3%, on the back of big gains from Tuesday, when the yen and sterling slumped amid a flare up in fiscal worries.
Gold added 0.2% to around $3,552 per ounce, retracing part of Thursday’s 0.4% decline as the market steadied following a breathless, seven-day 6.3% rally to a record peak of $3,578.50 on Wednesday.
Brent crude futures fell 0.3% to $66.77 a barrel, while U.S. West Texas Intermediate crude eased 0.3% to $63.29.
Eight members of the Organization of the Petroleum Exporting Countries and allies like Russia in OPEC+ will consider further raising production in October at a meeting on Sunday, two sources familiar with the discussions told Reuters.
Brent has fallen 3.5% over the past three days, and WTI has sagged 3.8%.
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