Stocks bounce back as jobs data soothes market jitters: Markets are closing in

(Bloomberg) — Asian shares rose on Friday after signs of labor market resilience lifted U.S. stocks.

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Stocks in Japan, South Korea and Australia rose along with stock futures in Hong Kong. Gains for Tokyo’s Topix index further eroded steep declines earlier this week, helped by moves in technology and banking stocks on Friday.

U.S. stock futures also rose, rallying on Thursday as the S&P 500 had its best day since November 2022, while the Nasdaq advanced 3.1%.

The U.S. rally was driven by U.S. jobless claims that showed fewer people filing for unemployment benefits than expected. The data eased concerns about the labor market after worse-than-expected employment data last Friday fueled fears of a recession rippling through global markets.

“It’s been quite a week,” said Liz Young Thomas of Social Finance Inc. “Up, down and everywhere. We have learned how sensitive markets now are to cooler US economic data, how broad the impact of the yen carry trade can be, and how conditioned investors can expect rate cuts as a salve for every scratch.”

The shares of Tokyo Electron Ltd. rose after the company raised its full-year profit forecast to March and reported a better-than-expected rise in sales.

The yen weakened slightly against the dollar early Friday, heading into its fourth day of depreciation against the dollar. The weakening removed headwinds for Japanese stocks, which can often fall when the yen rises.

Government bonds were largely steady in Asian trading after declines across the curve on Thursday – with the sell-off led by shorter maturities. Swap traders have further scaled back their bets on aggressive Federal Reserve easing in 2024. Cryptocurrencies soared, with investors in the financial markets returning to riskier assets. Australian government bonds fell early on Friday.

The global repricing was so sharp that at one point interest rate swaps carried a 60% chance of an emergency rate cut by the Fed in the coming week – well before the next scheduled meeting in September. Current pricing indicates a cut of around 40 basis points for September.

Despite expectations of imminent policy easing, there are some obstacles within the central bank itself. Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, has indicated he is unwilling to support a rate cut if inflation is above target, according to comments made in the US on Thursday.

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Elsewhere in Asia, Chinese inflation and producer prices are on the agenda, while money supply and new credit data could be released as early as Friday. The markets in Singapore are closed.

Soft Chinese inflation data could fuel demand for government bonds, keeping yields near record lows, Bloomberg Economics said. This adds to speculation that the People’s Bank of China could continue to cut interest rates to support the economy.

Oil was little changed after rallying on Thursday against the backdrop of simmering tensions in the Middle East. Gold fell slowly after gaining in the previous session.

Meanwhile, steel and aluminum producers in Canada urged Prime Minister Justin Trudeau’s government to quickly impose new tariffs on Chinese products, saying metals from the Asian powerhouse are flooding the Canadian market and threatening local jobs.

Some of the major moves in the markets:

Stocks

• Futures on the S&P 500 were little changed at 9:14 a.m. Tokyo time

• Hang Seng futures rose 1.5%

• Japan’s Topix rose 1.6%

• Australia’s S&P/ASX 200 rose 0.8%

• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0915

• The Japanese yen fell 0.1% to 147.45 per dollar

• The offshore yuan was little changed at 7.1865 per dollar

• The Australian dollar was little changed at $0.6587

Cryptocurrencies

• Bitcoin rose 3.3% to $61,488.67

• Ether rose 3.9% to $2,671.72

Bonds

• The yield on ten-year government bonds fell by one basis point to 3.98%

• The Japanese ten-year yield fell by 3.5 basis points to 0.840%

• The Australian ten-year yield rose by two basis points to 4.08%

Raw materials

• West Texas Intermediate crude was little changed

• Gold fell 0.2% to $2,423.88 an ounce

This story was produced with the help of Bloomberg Automation.

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