Friday, December 2, 2022

Asian stocks are cautious ahead of US payrolls data, and the dollar nurses losses

Asian shares tentative ahead of US payrolls data, dollar nurses losses


 SYDNEY:Prior to the US non-farm payrolls data, the next major test for investors looking for additional signs of a shift from the Federal Reserve, Asian shares were flat and Treasuries maintained gains on Friday, while the dollar sustained significant losses.


In the early trading session, MSCI's broadest index of Asia-Pacific shares outside of Japan lost 0.2%.Despite this, the index is expected to rise by 4.2 percent for the week, putting it close to its highest level since September.


The Nikkei stock market index in Japan declined 1.5%.


Nasdaq futures fell 0.4 percent, while S&P 500 futures fell 0.3 percent.After a significant rally the day before, buoyed by remarks from Fed Chair Jerome Powell that did not sound as hawkish as some had feared, US shares ended mixed on Thursday.


Evidence that the Fed's rate hikes have cooled the economy was added by overnight US data showing signs of easing cost pressure, including falling job openings and shrinking manufacturing activity.


Investors are also keeping an eye out for additional indications that China is loosening its zero-Covid policy and whether or not China will increase its contribution to global growth next year in the face of a global recession.


The Hang Seng index in Hong Kong opened 0.3% higher while the Chinese bluechips opened 0.2% lower.


After widespread protests were fueled by outrage over the world's toughest restrictions, sources told Reuters that China is going to announce an easing of its Covid-19 quarantine protocols and a reduction in mass testing in the coming days. This is a significant shift in policy.


According to Shane Oliver, chief economist at AMP Capital, markets may require some time to overcome technical resistance levels following the recent strong rally.


He stated, "But I suspect given the increasing signs that inflation is peaking globally and China is easing its Covid restrictions moving away from zero Covid - they haven't said as much but certainly it is moving away from zero Covid - that those things are probably positive." He added, "But I suspect given the increasing signs that inflation is peaking globally."


"The payrolls are the one to watch closely in the short term, but I think the rally can probably continue."


According to Deutsche Bank macro strategist Alan Ruskin, a rise in nonfarm payrolls of 50,000 to 150,000 in November would benefit bonds and stocks and keep the US dollar on the back foot.


According to a Reuters poll of economists, payrolls are likely to rise by 200,000 in November.


Futures have priced in a 78% likelihood of a 50-basis-point increase at the December policy meeting, and rates are now anticipated to peak between 4.75 percent and 5% by the middle of next year, as opposed to the previous range of 5% to 5.25 percent.


After two days of rallying, Treasuries maintained their gains in the bond markets.The benchmark 10-year Treasury note yield was 3.5303%, which was unchanged from its U.S. close of 3.527 percent.


With a US close of 4.254%, the two-year yield, which rises in response to traders' expectations of higher Fed fund rates, was little changed at 4.2584%.


On Friday, the US dollar was expected to fall by 1.2 percent per week, hovering around its three-month low against a basket of major currencies.


The Japanese yen also reached a new three-month high against the US dollar, while the Euro reached a fresh five-month high of $1.0539.


After breaking through major resistance at 68 cents in the previous session, the Australian dollar fell slightly to $0.6796 on hopes of a Fed pivot and China's relaxation of its zero-Covid policy.


Prices for oil fell ahead of the OPEC meeting this weekend on the market.


After soaring to a two-week high of $83.34 during the previous session on the back of a weaker dollar, US crude oil futures fell by 0.33 percent to approximately $81.02 per barrel.


Brent crude futures fell 0.26 percent to $86.61 a barrel.


Gold was down a little.One ounce of spot gold was traded at $1799.44.

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