(Bloomberg) — US stocks and an index of the dollar fell ahead of jobs data due Friday that will help determine the size of a Federal Reserve rate cut this month.
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In Asia, equity futures for Japan rose, as the yen stabilized after a rally this week, while those for Australia were little changed. Contracts for US equities slipped after the S&P 500 ended Thursday lower. Hong Kong is expected to shut its stock market Friday morning due to Super Typhoon Yagi.
Treasury yields were fractionally lower Thursday, with the 10-year yield falling three basis points to add 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.
“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.”
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 the median estimate in a Bloomberg survey of economists. 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.
“Markets are still trying to figure out if the economy is slowing too much, and whether the Fed is behind the curve,” said Chris Larkin at E*Trade from Morgan Stanley.
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 gains as traders digested the latest US data readings.
Key events this week:
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Eurozone GDP, Friday
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US nonfarm payrolls, Friday
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Fed’s John Williams speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 8:13 a.m. Tokyo time
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Hang Seng futures were little changed
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S&P/ASX 200 futures rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.1110
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The Japanese yen was little changed at 143.38 per dollar
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The offshore yuan was little changed at 7.0880 per dollar
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The Australian dollar was little changed at $0.6740
Cryptocurrencies
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Bitcoin was little changed at $56,105.63
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Ether rose 0.1% to $2,369.76
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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