TOKYO: Tech shares rallied on Thursday, driving Asia stock indexes higher, while gold hovered near a record high and the dollar languished as a weak U.S. labour market report bolstered bets for Federal Reserve interest rate cuts.
The U.S. government shutdown made it a near certainty that crucial monthly payrolls data won’t be released on Friday, but overnight the private ADP employment report showed the economy unexpectedly shed jobs in September, with the prior month also revised to a decline.
Even without the benefit of official labour data, the dismal ADP report had traders pricing in quarter-point Fed rate cuts at each of the two remaining policy meetings of the year as almost a done deal.
The promise of an easier policy environment helped lift Wall Street to fresh record highs on Wednesday, and the Philadelphia SE semiconductor index climbed more than 2%.
Chip sector shares were prominent in leading Japan’s Nikkei to gains of about 0.5%.
Taiwan’s tech-heavy bourse jumped 1.5%, while South Korea’s KOSPI shot up 2.8% after chip heavyweights Samsung and Hynix inked partnerships to supply OpenAI data centres.
Hong Kong’s Hang Seng added 0.5%.
The ADP report “suggests the U.S. economy is in almost dire need for further policy support,” and as a result, “the markets are discounting a much higher probability of rate cuts in October and December,” said Kyle Rodda, an analyst at Capital.com.
Meanwhile, “after some initial jitters, the markets shrugged off the U.S. government shutdown, at least for now,” he added.
“Historically, the impact of shutdowns has been trivial,” although “the delay of critical economic data could increase uncertainty about the path forward for U.S. monetary policy – and therefore lift volatility,” Rodda said.
The government shut down much of its operations on Wednesday as deep partisan divisions prevented Congress and the White House from reaching a funding deal, setting off what could be a long, gruelling standoff.
The combination of Fed easing bets and some shutdown angst pushed gold to a fresh all-time high of $3,895.09 overnight, while also supporting U.S. Treasuries, sending yields sharply lower.
The two-year Treasury yield sank to a two-week low of 3.531% on Thursday in Tokyo trading hours.
Gold paused for breath, last changing hands at around $3,865.
The U.S. dollar index , which tracks the currency against six major peers, languished near the one-week low of 97.459 reached overnight.
It last stood at 97.672, slightly down from Wednesday’s closing level.
The dollar was little changed at 147.01 yen , following a 1.8% three-day tumble.
The euro rose slightly to $1.1738, and sterling also ticked up to $1.34835.
Oil prices edged higher on prospects of tighter sanctions on Russian crude, looking to snap a three-day losing streak to 16-week lows.
Brent crude futures gained 0.2% to $65.50 a barrel, and U.S. West Texas Intermediate crude rose 0.2% to $61.92 a barrel.
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