Stocks, Bonds Struggle For Momentum Into US Jobs: Markets Wrap

(Bloomberg) — Stocks, bonds and major currencies held to tight ranges Friday as traders prepared for US jobs data that will help determine the size of a Federal Reserve rate cut later this month.

Shares in Japan fluctuated, as the yen stabilized after a rally this week, while those in Australia were little changed. Futures for US equities slipped after the S&P 500 ended Thursday lower. Pre-opening trading of Hong Kong securities was shut Friday due to Super Typhoon Yagi. 

Treasury yields opened steady in the Asian session after minor declines Thursday, adding downward pressure on the greenback. The Bloomberg dollar index, which tracks the US currency against a basket of peers, inched lower early Friday after a 0.2% drop on Thursday. Australian and New Zealand bonds were little changed.

The muted moves come ahead of a nonfarm payroll report that will cast fresh light on the health of the US jobs market. Traders are still pricing in over 100 basis points of easing this year, implying a potential super-sized reduction. Given Jerome Powell’s recent emphasis on the labor market, many on Wall Street say payrolls will dictate whether the central bank cuts by 25 or 50 basis points this month.

There is limited event risk to be concerned about in Asia today, “so again the session will be defined by further pre-positioning ahead of US payrolls,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “Traders will use the time in front of the screens to review, massage and manage positioning and exposures and the possible cross-market volatility that can kick up.”

Elsewhere in Asia, China may be facing new export controls on critical technologies by the Biden administration. Washington has cracked down on China’s ability to access cutting-edge technologies needed for artificial intelligence, over fears that advanced chips and components could lend Beijing a military edge. 

Markets will also be keeping a close eye on China’s bond market as some government debt the central bank bought recently is now being sold in the secondary market, according to traders – a possible sign that authorities are once again intervening to curb a debt rally.

Meanwhile, Thailand’s parliament passed a 3.75 trillion baht ($111 billion) budget allowing newly-appointed Prime Minister Paetongtarn Shinawatra to lift state spending to accelerate the nation’s economic recovery. 

The S&P 500 fell 0.3%. Nvidia Corp. climbed, with Bank of America Corp. analysts saying the recent plunge has created an “enhanced” buying opportunity. Tesla Inc. jumped on plans to launch the driver assistant in China and Europe. In late hours, Broadcom Inc. slumped on a tepid forecast.

In the run-up to the US payroll figures, economic data was mixed. Services expanded at a modest pace, companies added the fewest jobs since the start of 2021, while unemployment claims trailed estimates.

The jobs report is expected to show payrolls increased by about 165,000, based on estimates. While above the modest 114,000 gain in July, average growth over the most recent three months would ease to a little more than 150,000 — the smallest since the start of 2021. After the report, New York Fed President John Williams and Fed Governor Christopher Waller are scheduled to make comments.

“The danger in really ‘bad news’ is that even if the Fed is prepared to react aggressively, it might be too late to stave off real economic weakness,” Steve Sosnick at Interactive Brokers said. “But there is a worry that if the news is ‘too good,’ the Fed might be reticent to cut rates as fast as the market has come to expect.”

In commodity markets, oil edged higher Friday as OPEC+ postponed its oil supply hike by two months. The move, however, wasn’t enough to roll back steep losses in crude prices amid fears about fragile demand. Gold held onto its gains as traders digested the latest US data readings. 

Key events this week:

• 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 fell 0.1% as of 9:16 a.m. Tokyo time
• Hang Seng futures were little changed
• Japan’s Topix fell 0.2%
• Australia’s S&P/ASX 200 rose 0.2%
• Euro Stoxx 50 futures fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was unchanged at $1.1111
• The Japanese yen rose 0.2% to 143.22 per dollar
• The offshore yuan was little changed at 7.0874 per dollar
• The Australian dollar was little changed at $0.6740

Cryptocurrencies

• Bitcoin rose 0.4% to $56,271.6
• Ether rose 0.3% to $2,375.17

Bonds

• The yield on 10-year Treasuries was little changed at 3.73%
• Australia’s 10-year yield was little changed at 3.93%

Commodities

• West Texas Intermediate crude rose 0.3% to $69.33 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu.

©2024 Bloomberg L.P.