US jobs data buoys Asian shares, but trade talks act as counterweight

Tokyo — Asian shares edged higher on Monday after data showed the US unemployment rate dropped to the lowest in almost 50 years, easing the concern of a slowdown in the world’s largest economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.16%. Australian shares were up 0.63%. Japan’s Nikkei stock index opened higher but reversed course and fell 0.2%.

The pan-region Euro Stoxx 50 futures were up 0.2% at 3,435, German Dax futures were up 0.18% while FTSE futures were down 0.03%.

US stock futures fell 0.39% in Asia on Monday after the S&P 500 surged 1.4% on Friday.

The offshore yuan fell about 0.3% to 7.1337 to the dollar after Bloomberg reported that Chinese officials are signalling they are increasingly reluctant to agree to a broad trade deal pursued by US President Donald Trump.

There was no onshore yuan trading, as Monday is the last day of a long China holiday for its national day.

The media report also pushed up safe-haven assets such as gold and the yen.

Crude oil futures pared losses to trade little changed amid caution about a resolution to the trade dispute.

Unemployment fell

Sentiment towards the US economy deteriorated sharply much of last week after disappointing data on manufacturing and services suggested the trade war was taking a toll, and more rate cuts would be needed to avert a potential recession in the world’s biggest economy.

But a modest September increase in US jobs, announced on Friday, eased some of these concerns and lifted US markets that day. The US unemployment rate fell to 3.5% in September to reach the lowest since December 1969. Non-farm payrolls also grew in September, but slightly less than expected.

“Moderate job growth and subdued inflation in the US is a positive for stocks,” said Shusuke Yamada, head of forex and Japan equity strategy at Merrill Lynch Japan Securities in Tokyo.

This week, the main focus will be the high-level US-China trade negotiations expected in Washington on October 10-11 to see if the two sides can end a bruising year-long trade war that has hurt global growth and raised the risk of recession.

“The dollar is a little soft heading into US-China trade talks,” Yamada said. “I see some scope for yen gains, but it is not likely to be a big move higher.”

The US and China have slapped tariffs on each other’s goods as part of a long-running dispute over Beijing’s trading practices, which Washington says are unfair.

Central banks about the world have been easing policy to try to offset the effect of the trade war.

The Federal Reserve has lowered interest rates twice this year. Before the jobs report, traders saw a 85.2% chance the Fed will cut rates by 25 basis points to 1.75%-2.00% in October, but that chance has now fallen to 81.1%, according to CME Group’s FedWatch tool.

The yield on benchmark 10-year Treasury notes rose to 1.5272% on Monday compared with its US close of 1.5140% on Friday.

Spot gold, an asset often bought during times of uncertainty, rose 0.05% to $1,505.11 per ounce.

The yen, also considered a safe-haven asset, edged slightly higher to 106.85 vs the US dollar and gained to 72.12 per Australian dollar.

US crude was flat at $52.81 a barrel. Brent crude fell 0.15% to $58.28 per barrel. In addition to worries about the global economy, signs of oversupply in the oil market are weighing on futures prices.

Political instability in Hong Kong could hurt market sentiment after China’s army took the unusual step of issuing warnings to antigovernment protesters in Hong Kong at the weekend.

Hong Kong’s stock market is closed on Monday for a public holiday. Trading will resume on Tuesday.

Four months of often violent protests against Chinese rule has pushed the former British colony to the brink of recession and posed a serious challenge to Beijing’s control of the city.

Reuters