Asian Stocks Eye Early Gains After US Jobs Report: Markets Wrap

(Bloomberg) — Most Asian stocks are set to open higher in early trading after strong US jobs data underscored the health of the world’s largest economy and boosted soft landing hopes.

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Australian shares and Japan equity futures rose while contracts in Hong Kong slipped. US contracts edged higher early Monday after the S&P 500 rose 0.9% on Friday. The dollar was steady following its best week in two years as Treasury yields surged amid recalibrated bets on the size of the Federal Reserve’s next rate cut.

The so-called soft landing narrative has again taken over markets, pushing back concerns of a US recession after employers added 254,000 jobs in September — the most in six months — and the jobless rate unexpectedly declined. A slew of other economic data last week — including private-sector job numbers and a measure of the services sector — painted a picture of a strong US economy.

“Tailwinds into Asia are probably more significant than anywhere else in the world” with the Goldilocks US economy and fresh Chinese stimulus, said Kyle Rodda, a senior analyst at Capital.com. “This is a very opportune time to reallocate to Asia given the fact there are signs of clear economic strength and therefore outperformance in cyclical sectors of which Asia is heavily weighted towards.”

Asian currencies, however, are set to further unwind last quarter’s rally after a gauge of the dollar climbed 0.4%, pressuring emerging market peers. The Korean won slumped more than 1% after the jobs report while currency forwards for the Indonesian rupiah, Philippine peso and Thai baht all fell, indicating early losses when spot markets reopen.

While expectations of the Fed slashing rates have adjusted, “more needs to be done,” said Win Thin, global head of markets strategy at Brown Brothers Harriman. “This week brings key U.S. inflation data that should help extend the dollar recovery and keep downward pressure on emerging market FX.”

Traders will soon shift to preparing for China’s reopening on Tuesday after stimulus measures announced prior to the Golden Week holiday lifted Hong Kong shares to their highest since March 2022. Officials from the National Development and Reform Commission will host a briefing on implementing incremental economic policies.

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“The market will be keen to hear substance that could result in animal spirits, demand and consumption ramping up,” Chris Weston, head of research at Pepperstone Group said of the NDC meeting. “It’s hard to put into context the rally we’ve seen in these equity indices” and all have found strong buying support on the slightest pullback, he said.

Elsewhere in Asia, New Zealand bonds fell less than Treasuries as markets anticipate the nation’s central bank will cut interest rates by 50 basis points on Wednesday. Australia’s bond market was closed for a holiday in Sydney.

Oil drifted lower in early trading Monday as traders weighed Israel’s potential retaliation against Iran for a missile attack last week, with President Joe Biden discouraging a strike on Tehran’s crude fields.

This week, Germany is expected to downgrade its growth outlook while a slew of inflation readings in emerging markets are due. Minutes from the Fed’s September policy meeting will also be released as well as the September CPI print before the start of earnings season.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 8:25 a.m. Tokyo time

• Hang Seng futures fell 1%

• Australia’s S&P/ASX 200 rose 0.1%

• Nikkei 225 futures rose 2.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0970

• The Japanese yen fell 0.2% to 149.01 per dollar

• The offshore yuan was little changed at 7.0971 per dollar

• The Australian dollar was little changed at $0.6801

Cryptocurrencies

• Bitcoin was little changed at $62,644.43

• Ether fell 0.2% to $2,434.49

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

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