Asia struggles to track Wall St up after US jobs, Fed minutes

The softening US jobs market has given the Federal Reserve room to start cutting interest rates – Copyright AFP Frederic J. BROWN

Stocks fluctuated in Asia on Thursday after Wall Street returned to winning ways on the back of softer-than-expected jobs data and minutes showing some Federal Reserve officials were open to an interest rate cut at their meeting last month.

The readings reinforced optimism that the central bank will begin unwinding its long-running monetary tightening campaign, with analysts saying the main debate is over how big the move will be and how many more will follow.

They also came just days before Fed chief Jerome Powell was due to make a much-anticipated speech at the annual central bankers symposium in Jackson Hole, Wyoming, where it is hoped he will flag a cut.

The latest round of buying came after Labor Department figures revealed US employers added around 68,000 fewer jobs monthly in the year to March than initially estimated.

The reading rammed home the fact that the labour market had softened — at the same time inflation was coming down — enough for decision-makers to begin lowering borrowing costs.

Minutes from the Fed’s July policy meeting, meanwhile, showed most members thought it “appropriate” to cut in September, while some saw “a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision”.

Observers said the minutes made a cut all but certain, with discussions now on whether it goes for 25 or 50 basis points.

Investors are pricing more than one percentage point of cuts by the end of the year, according to Bloomberg News.

But the Fed meeting came before a jobs report that came in so far below expectations it helped spark a sell-off across markets and fuelled fears of a recession, Ray Attrill at National Australia Bank pointed out.

That, he said, “will doubtless have reinforced these sentiments” about cutting.

“Whether it means the… (September) meeting could yet produce a 50 rather than 25 basis point cut doubtless rests both with the August non-farm payrolls report due on September 5 and the incoming inflation data between now and the meeting,” he added.

“The former will at a minimum need to mimic (or exceed) the July softness and the latter prove very comforting to lead the Fed to cut by 50 basis points.”

And independent analyst Stephen Innes warned the jobs revision was close to “the worst case scenario” and a “wake-up call”.

“The economy’s resilience is still key — if it holds steady, the stock market might continue its climb,” he said.

“But here’s the kicker: everything from the scale of Fed cuts to the true strength of the US economy could come crashing together in a classic ‘be careful what you wish for’ scenario when the next (jobs) report drops.”

While all three main indexes on Wall Street rose — with the S&P 500 within a whisker of a record — Asian markets swung in and out of positive territory.

Tokyo, Hong Kong, Sydney and Manila rose while Shanghai, Singapore, Seoul, Wellington and Taipei slipped.

On currency markets, the dollar remained under pressure from the expected rate cuts, while investors are also looking ahead to Bank of Japan boss Kazuo Ueda’s questioning from lawmakers after this month’s rate hike and hawkish comments caused panic across markets. 

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.6 percent at 38,190.85 (break)

Hong Kong – Hang Seng Index: UP 0.2 percent at 17,425.61

Shanghai – Composite: DOWN 0.2 percent at 2,850.44

Dollar/yen: UP at 145.45 yen from 145.22 yen on Wednesday

Euro/dollar: DOWN at $1.1143 from $1.1151

Pound/dollar: DOWN at $1.3084 from $1.3087

Euro/pound: DOWN at 85.16 pence from 85.18 pence 

West Texas Intermediate: DOWN 0.4 percent at $71.63 per barrel

Brent North Sea Crude: DOWN 0.3 percent at $75.83 per barrel

New York – Dow: UP 0.1 percent at 40,890.49 (close)

London – FTSE 100: UP 0.1 percent at 8,283.43 (close)