Asian shares track Wall St gains before payrolls test

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2 days ago

The bullish sentiment spilled over into Japan's Nikkei, which rose 1.0%, while South Korean stocks gained 0.5%. (EPA Images pic)
SYDNEY : Asian shares firmed on Monday as seemingly unquenchable demand for technology companies lifted S&P 500 futures to another all-time peak, while the dollar dipped on concerns US jobs data will show enough weakness to justify larger rate cuts.
Investors were also keeping a wary eye on the progress of a huge US tax-cutting and spending bill slowly making its way through the senate, with signs it may not make it by President Donald Trump's preferred July 4 deadline.
The Congressional Budget Office estimated the bill would add US$3.3 trillion to the nation's debt, testing foreign appetite for US Treasuries.
There was no doubting the demand for the US tech sector and megacap growth stocks including Nvidia, Alphabet and Amazon. Nasdaq futures rose another 0.3%, while S&P 500 e-minis added 0.2%.
The bullish sentiment spilled over into Japan's which rose 1.0%, while South Korean stocks gained 0.5%. MSCI's broadest index of Asia-Pacific shares outside Japan firmed 0.1%.
A holiday on Friday means US payrolls are a day early, with analysts forecasting a rise of 110,000 in June with the jobless rate ticking up to 4.3%.
The resilience of the labour market is a major reason the majority of Federal Reserve members say they can afford to wait on cutting rates until they can gauge the true impact of tariffs on inflation, so a weak report would stoke speculation of a rate cut in July rather than September.
'While initial jobless claims retreated somewhat from their recent high, continuing claims jumped higher yet again,' noted Michael Feroli, head of US economics at JPMorgan. 'Consumers' assessment of labour market conditions also deteriorated in the latest confidence report.'
'Both of these developments suggest that the unemployment rate in June should tick up to 4.3%, with a significant risk of reaching 4.4%.'
The latter outcome would likely see futures push up the chance of a July easing from the current 18% and price in more than the present 63 basis points of cuts for this year.
Dollar doldrums
Fed chair Jerome Powell will have an opportunity to repeat his cautious outlook when he joins several other central bank chiefs at the European Central Bank forum in Sintra on Tuesday.
The prospect of an eventual policy easing has helped Treasuries weather worries about the US budget deficit and the huge amount of borrowing it entails.
Yields on 10-year Treasuries were steady at 3.27%, having fallen 9 basis points last week.
The dollar has not fared so well, in part due to concerns tariffs and chaotic policies from the White House will drag on economic growth and erode the country's claim to exceptionalism.
The euro was near its highest since September 2021 at US$1.1731, having climbed 1.7% last week, while sterling stood near a similar peak at US$1.3719.
The dollar was down a fraction at 144.48 yen, after losing 1% last week, while the dollar index dipped to 97.163.
James Reilly, a senior markets economist at Capital Economics, noted the dollar had fallen by more at this stage in the year than in any previous year since the US moved to a free-floating exchange rate in 1973.
'At this point, further weakness could become self-reinforcing as underhedged European/Asian portfolios chase the move,' he added.
'So, we suspect that this could be a pivotal period for the greenback – either it turns around here or there is another 5% or so fall around the corner.'
In commodity markets, the general revival in risk sentiment has undermined gold, which slipped to US$3,266 an ounce and further away from April's record top of US$3,500.
Oil prices continued to struggle on concerns about plans for increased output from Opec+, which contributed to a 12% slide last week.
Brent dropped a further 55 cents to US$67.22 a barrel, while US crude eased 68 cents to US$64.84 per barrel.