(Bloomberg) — Most Asian stocks are likely to open higher in early trading after strong U.S. jobs data underlined the health of the world’s largest economy and boosted hopes of a soft landing.
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Stock futures in Australia and Japan rose, while those in Hong Kong fell. US contracts rose early on Monday after the S&P 500 rose 0.9% on Friday. The dollar was steady after its best week in two years as Treasury yields rose on recalibrated bets on the size of the Federal Reserve’s next rate cut.
The so-called soft landing story has taken over markets again, easing concerns about a US recession after employers added 254,000 jobs in September – the most in six months – and unemployment unexpectedly fell. A slew of other economic data over the past week — including private sector job numbers and a measure of the services sector — painted a picture of a strong U.S. economy.
“The tailwind to Asia is probably more important than anywhere else in the world” with America’s Goldilocks economy and new Chinese stimulus, said Kyle Rodda, senior analyst at Capital.com. “This is a very opportune time to make a reallocation to Asia, given that there are signs of clear economic strength and therefore outperformance in cyclical sectors where Asia is heavily weighted.”
However, Asian currencies are set to further weaken last quarter’s rally after the dollar rose 0.4%, putting pressure on emerging markets. The Korean won fell more than 1% after the jobs report, while currency futures for the Indonesian rupiah, Philippine peso and Thai baht all fell, pointing to early losses as spot markets reopen.
While expectations for a Fed rate cut have been adjusted, “more needs to be done,” said Win Thin, global head of markets strategy at Brown Brothers Harriman. “This week brings important US inflation data that should help extend the dollar’s recovery and maintain downward pressure on emerging market currencies.”
Traders will soon start preparing for China’s reopening on Tuesday after stimulus measures announced ahead of Golden Week lifted Hong Kong shares to their highest level since March 2022. Officials from the National Development and Reform Commission will hold a briefing on the implementation of incremental economic policies.
“The market will be keen to hear anything that could lead to an increase in spirits, demand and consumption,” Chris Weston, head of research at Pepperstone Group, said of the NDC meeting. “It’s difficult to put into context the rally we’ve seen in these stock indexes” and all have found strong buying support at the slightest pullback, he said.
Elsewhere in Asia, New Zealand bonds fell less than government bonds as markets expect the country’s central bank to cut rates by 50 basis points on Wednesday. The Australian bond market was closed due to a holiday in Sydney.
Oil fell in early trading on Monday as traders weighed Israel’s possible retaliation against Iran for a missile attack last week, with President Joe Biden discouraging an attack on Tehran’s crude fields.
This week, Germany is expected to downgrade its growth outlook amid a slew of inflation data in emerging markets. Minutes of the Fed’s September policy meeting will also be released, as will the September CPI print before the start of earnings season.
Some of the major moves in the markets:
Stocks
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Nikkei 225 futures rose 2.6% as of 7:33 a.m. Tokyo time
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S&P/ASX 200 futures rose 0.3%
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Hang Seng futures fell 1%
Currencies
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The euro was little changed at $1.0969
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The Japanese yen fell 0.2% to 148.92 per dollar
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The offshore yuan was little changed at 7.0994 per dollar
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The Australian dollar rose 0.1% to $0.6804
Cryptocurrencies
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Bitcoin fell 0.3% to $62,458.19
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Ether fell 0.6% to $2,424.39
Bonds
Raw materials
This story was produced with the help of Bloomberg Automation.
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