© Reuters. FILE PHOTO: A man wearing a face mask after the coronavirus disease (COVID-19) outbreak stands in front of an electric board showing the stock index of Nikkei (above in C) and other countries outside a brokerage in a business district in Tokyo . Japan, January
Posted by Wayne Cole
SYDNEY (Reuters) – Asian stocks tried to extend their most recent rally to a third week on Monday in hopes that US employment numbers show the expected hiring pickup in May and keep the global recovery on track.
MSCI’s broadest index for Asia Pacific stocks outside of Japan rose 0.3% after rising 2.2% last week. fell 0.7% as Australia hit a new all-time high.
Chinese blue chips were down 0.4% while a survey showed a slight slowdown in factory activity but a revival in the vast service sector.
“It feels like a market looking for direction in the face of uncertainty about the interplay between much-feared inflation and the hoped-for growth recovery,” said Patrik Schowitz, global multi-asset strategist at JP Morgan Asset Management.
“Although we continue to reduce risk in this environment, we remain long in light of the likely continued strong growth and the remaining upside potential in economic and earnings growth expectations.”
Markets in the United States and Britain are closed for a holiday, but futures were still trading in Asia, with the Nasdaq rising 0.2% and rising 0.1%. EUROSTOXX 50 futures were down 0.1%.
The main event of the week will be US payrolls on Friday, with average projections of 650,000, but the outcome remains uncertain after April’s shockingly modest rise from 266,000.
That April number was almost 750,000 below forecast, the biggest “miss” in the series’ history.
NatWest Market economist Kevin Cummins (NYSE 🙂 noted that even if the total workforce increased by around 550,000, it would still be 7.7 million below the February 2020 level.
“The labor market is a long way from being restored,” he added. “In our opinion, the data is unlikely to convince Fed Chairman Powell that the progress is substantial enough to signal a rejuvenation.”
The next meeting of the Federal Reserve will be on June 16th and this week will be the last opportunity for members to discuss politics before the June 5th embargo begins.
So far, investors have taken the Fed at its word that the labor market still has to improve a lot before tapering is discussed. This helped push 10-year US note yields back to 1.58%, despite core inflation data beating projections.
The US’s economic outperformance has a downside in that it has greatly increased the country’s trade deficit and increased the need for foreign funding to fill the already huge budget gap.
“The US economy will face a period of high budget deficits and rising debt levels for the foreseeable future, ensuring that the ‘twin deficit’ risk for the USD will remain a feature of the market landscape for years to come,” said Ray Attrill , Head of FX Strategy at NAB.
It stood at 89.983, close to a five-month low. The euro remained stable at $ 1.2199, just below the four-month high of $ 1.2266 hit last week.
The dollar has outperformed the Japanese yen as investors borrow the currency at extremely low rates to buy higher-yielding assets. The dollar was last traded at 109.84 yen after hitting a two-month high of 110.19 last week.
has so far gained 1.7% in May to hit three-year highs and break the psychologically important mark of 6.4 per dollar. [CNY/]
Concerns over global inflation and extreme volatility in cryptocurrencies have been a boon to gold, which was held at $ 1,903 after hitting a four-month high of $ 1,1912 last week.
Oil prices were firm after rising more than 5% last week and hitting their two-year closing highs as expectations of a recovery in global demand outweighed concerns about further supply from Iran after the sanctions were lifted. [O/R]
All eyes will be on OPEC this week as it reviews its supply agreement, and any indication of an increase in production could put prices under pressure.
rose 13 cents to $ 68.85 a barrel while it rose 21 cents to $ 66.53.