Asian shares tick up ahead of US payrolls test
Wall Street climbed overnight to close at new record highs after President Donald Trump announced that the US has struck a trade deal with Vietnam, including a 20 per cent tariff on exports to the US. That fuelled hopes that more deals will be forthcoming, with negotiations under way for a trade agreement with India.
The MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 per cent on Thursday to hover just below a near four-year top. Japan's Nikkei was flat.
China's blue chips edged up 0.2 per cent, while Hong Kong's Hang Seng index fell 0.6 per cent after data showed China's services activity expanded at the slowest pace in nine months in June.
Both Nasdaq futures and S&P 500 futures were little changed in Asia
Investors were waiting for Trump's massive tax and spending bill to pass the House of Representatives for possible final approval. The bill is expected to add $US3.3 trillion to the national debt, slash taxes and reduce social safety net programs.
The main risk event for markets will be the US payrolls figures due later in the day. Analysts are forecasting a rise of 110,000 in June with the jobless rate ticking up to 4.3 per cent but the stakes are high after a private sector payrolls report surprised with the first fall in over two years.
The resilience of the labour market is a major reason the majority of Federal Reserve members say they can afford to hold off on cutting rates until they can gauge the real impact of tariffs on inflation.
"These labour market indicators warn of the risk that the unemployment rate could spike to 4.4 per cent, the highest since October 2021," said Tony Sycamore, analyst at IG.
"This would quickly increase the probability of a July Fed rate cut to around 70 per cent."
Futures imply just a 25 per cent probability for a rate cut in July from the Fed, which has not eased policy at all this year, drawing the ire of Trump who reiterated his call on Wednesday for Chair Jerome Powell to resign.
The Treasuries market was tense before the data as a weak jobs report would send yields sharply lower. Ten-year Treasury bond yield slipped 2 basis points to 4.265 per cent on Thursday, while two-year yields eased two basis points to 3.77 per cent.
The dollar is again under pressure, having caught some relief overnight. Concerns about the Fed's independence in the wake of Trump's criticism have driven the dollar to its lowest against its peers in over three years.
Trump, who said rates should be cut to one per cent from the current Fed benchmark rate of 4.25 per cent to 4.50 per cent, has repeatedly railed against Powell for not lowering borrowing costs since his return to the White House in January.
The euro inched up 0.1 per cent to $US1.1807, just a whisker away from a nearly four-year top of $US1.1829 hit on Tuesday, while sterling added 0.1 per cent, recovering a steep 0.8 per cent fall overnight, as fears about the future of its finance minister Rachel Reeves eased.
Investor anxiety over UK finances after the British government's reversal on welfare reforms caused gilt yields to jump overnight, up nearly 23 basis points at one point, the most since October 2022.
In commodities markets, oil prices were slightly lower after jumping three per cent overnight as Iran suspended cooperation with the UN nuclear watchdog. US crude futures slipped 0.4 per cent to $US67.20 a barrel while Brent was at $US68.84 per barrel, also 0.4 per cent lower on the day.
Gold prices eased 0.4 per cent to $US3,342 an ounce.
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"The focus of this bill, the justification for all of the cuts that will hurt everyday Americans is to provide massive tax breaks for billionaires." Democrats are united in opposition to the bill, but on their own lack the votes to stop the bill in the chamber, which is controlled 220-212 by Trump's Republicans. Republicans can afford no more than three defections to get a final bill passed. The past two weeks have shown deep Republican divides on the bill, which would add $US3.4 trillion ($A5.2 trillion) to the nation's $US36.2 trillion in debt and make major cuts to social programs including Medicaid. Republican lawmakers have long railed against the growth of the debt, which has continued during the past two decades regardless of which party was in control in Washington. A handful of Republican holdouts have objected to the bill. One, senator Thom Tillis, opted not to seek re-election after voting against it. Nonetheless, Trump has succeeded in getting the votes to advance the legislation at each step of the way. Votes in the House were held open for hours on Wednesday during the day and overnight as House Speaker Mike Johnson and the White House talked with reluctant members. Johnson expressed optimism on Wednesday night, saying lawmakers had a "long, productive day" discussing the issues. He praised Trump for making phone calls to the holdouts through the early hours of Thursday morning. "There couldn't be a more engaged and involved president," Johnson told reporters. The Senate passed the legislation by the narrowest possible margin on Tuesday after intense debate on the bill's hefty price tag and $US900 million in cuts to the Medicaid healthcare program for low-income Americans. Any changes made by the House would require another Senate vote, which would make it all but impossible to meet Trump's self-imposed deadline of getting the legislation approved by the July 4 holiday. The bill would raise the nation's debt ceiling by $US5 trillion, a necessary step to avoid a devastating default in coming months. The legislation contains most of Trump's top domestic priorities. It would extend Trump's 2017 tax cuts, cut health and food safety net programs, fund Trump's immigration crackdown, and zero out many green-energy incentives. It also includes a $US5 trillion increase in the nation's debt ceiling, which lawmakers must address in the coming months or risk a devastating default.
