Asian shares battle as investors digest weak US jobs data

Tokyo — Asian shares struggled for traction on Monday after US employment data raised doubt about the strength of the global economy, while investor jitters ahead of crucial Brexit votes in the UK parliament this week weighed on the pound.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed from Friday’s three-week low, with broad weakness offset by small gains in Chinese shares.

China’s blue-chip CSI300 index gained 0.5% after Friday’s 4% fall, which was triggered after CITIC Securities issued a rare “sell” rating on a major insurer and by a clampdown on grey-market, margin financing.

“Trading volume is surging while foreign investors have been selling late last week,” said Naoki Tashiro, president of TS China Research, adding that suggests buying by retail investors is driving Chinese shares.

Japan’s Nikkei gained 0.2% after four consecutive sessions in the red last week.

Wall Street’s main indices posted their biggest weekly decline since the market tumbled at the end of 2018 last week, falling for the fifth consecutive day on Friday on the shocking payrolls data.

The US economy created only 20,000 jobs in February, the weakest reading since September 2017. As a result, bond yields dropped, with the 10-year treasuries yield hitting a two-month low of 2.607%. It last stood at 2.638%.

The two-year yield also hit a two-month low of 2.438%, edging near the current Fed funds rate around 2.40%.

Fed funds futures are pricing in more than 20% chance of a rate cut in 2019.

“The headline reading was so weak that the market could have reacted more aggressively. I would say markets reacted relatively calmly because there were elements that suggest weakness is temporary,” said Tomoaki Shishido, fixed income strategist at Nomura Securities.

While job growth was weak, average hourly earnings rose 11c, or 0.4%, raising the annual increase to 3.4%, the biggest gain since April 2009.

Retail sales figures for January’s due at 12.30pm GMT is a key focus given its December reading was surprisingly weak.

Fed chair Jerome Powell said on Friday that the central bank will be careful not to shock financial markets as it stabilises its bond portfolio, saying that it does not see problems in the US economy that warrant an immediate change in its policy.

He also said the new normal for the Fed’s total liabilities may be in the ballpark of 16.5% of GDP. Many market players now expect the Fed to unveil a plan to end its balance sheet runoff as early as next week.