Asian shares were flat and Treasuries held on to gains on Friday ahead of US non-farm payrolls data, the next big test for investors looking for more signs of change from the Federal Reserve, while the dollar suffered heavy losses.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.2% in early trade. Nonetheless, the index is set to rise 4.2% for the week, hovering around the highest level since September.
Japan’s Nikkei fell 1.5%.
S&P 500 futures ESc1 declined 0.3%, while Nasdaq futures NQc1 shed 0.4%. US stocks closed mixed on Thursday after a big rally the day before, buoyed by comments from Fed Chair Jerome Powell that some had feared.
Overnight US data that showed falling US job openings and subdued US manufacturing activity pointed to signs of easing cost pressures, evidence that the Fed’s rate hike has cooled the economy.
Investors are also watching for more signs that China is easing its zero-COVID policy, and whether China will contribute more to global growth next year amid a global slowdown.
Chinese blue chips opened 0.2% lower while Hong Kong’s Hang Seng index was higher 0.3%.
China is set to announce an easing of its COVID-19 quarantine protocols in the coming days and a reduction in mass testing, sources told Reuters, a notable change in policy after anger over the world’s toughest restrictions fueled widespread protests.
After a recent strong rally, markets are hovering around technical resistance levels in some cases, and getting to those points could take some time, said Shane Oliver, chief economist at AMP Capital.
“But I suspect that given the growing signs that inflation has peaked globally and that China is moving its COVID restrictions away from zero COVID – they haven’t said as much but certainly it is moving away from zero COVID.” is — that those things are probably positive,” he said.
“I think the rally could probably continue but in the short term, payrolls are going to be closely watched.”
Alan Raskin, macro strategist at Deutsche Bank, said if nonfarm payrolls rose by 50,000 to 150,000 in November, it would be favorable for bonds and equities and put US dollar trades on the backfoot.
Economists polled by Reuters expect payrolls to increase by 200,000 in November.
There is a 78% chance of a 50 basis point rise in futures prices at the December policy meeting, while rates are now expected to hover around 4.75% to 5%, compared to 5% to 5.25% by the middle of next year.
In bond markets, Treasuries held on to gains after two days of gains. The yield on benchmark 10-year Treasury notes US10YT=RR was largely flat at 3.5303%, compared with its US counterpart at 3.527%.
The two-year yield, which rises with traders’ expectations of higher Fed funds rates, was little changed at 4.2584% compared with the US close of 4.254%.
The US dollar hovered around its three-month low against a basket of major currencies on Friday and was set for a 1.2% weekly decline.
The euro rose to a five-month high of $1.0539, while the Japanese yen also hit a new three-month high against the US dollar.
The Australian dollar fell slightly to $0.6796 after blowing past key resistance at 68 cents in the previous session, on expectations of a Fed pivot and after China eased its zero-COVID policy.
Oil prices declined ahead of the OPEC meeting over the weekend.
US crude oil futures CLc1 fell 0.33% to around $81.02 a barrel, having touched a two-week high of $83.34 in the previous session on a softer dollar.
Brent crude futures LCOc1 declined 0.26% to $86.61 a barrel.
Gold was down slightly. Spot gold was trading at $1799.44 an ounce.