Asian equities edge lower ahead of US jobs data

The yen was little changed after fluctuating against the dollar as base salaries for regular workers in Japan rose by a record

Asian equities tracked a drop in US shares ahead of jobs data that may help shape the direction of the Federal Reserve’s policy path later this month.

Equities in Japan, Australia and futures in Hong Kong all fell, taking cues from the downbeat mood on Wall Street. The S&P 500 dropped 0.2% and the tech-heavy Nasdaq 100 slipped 0.3%, their first declines in five sessions.

Treasuries were steady Friday following muted moves on Thursday that favored the long-bonds, with 10-year and 30-year yields slightly lower. Swap trading showed the implied odds of a quarter-point rate cut in the Fed’s December meeting are around 70%.

The yen was little changed after fluctuating against the dollar as base salaries for regular workers in Japan rose by a record.

The moves signal caution ahead of Friday’s nonfarm payrolls data after bouts of political turmoil in Asia and Europe have triggered a wave of volatility across currency markets but failed to jolt stocks. US jobless claims rose to a one-month high on Thursday, while economists estimate payrolls rose by 220,000 in November, rebounding after two hurricanes and a strike lowered October numbers.

“Chipmakers were weak in the US market, and semiconductor manufacturing equipment-related stocks in Japan are also vulnerable to selling,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. Still, “it’s difficult to see any major moves today ahead of the release of the US employment data.”

In Europe, a measure of France’s bond risk fell amid hopes lawmakers will strike a deal on next year’s budget sooner than many investors had expected. French President Emmanuel Macron said he will serve out the remainder of his presidential term as he seeks to quickly stymie the political turmoil.

Elsewhere, South Korea is planning measures to boost after-hours liquidity in the won, after this week’s political crisis triggered a surge in volatility in the currency.

In commodities, oil was mostly unchanged after OPEC+’s decision to push back the revival of shuttered production by another three months failed to lift sentiment. Meanwhile, Chevron Corp. said it plans to slow production growth in the biggest US oil field next year. Gold held its declines.

Bitcoin pulled back a record high with some traders already seeking to hedge against a deeper retreat after the original cryptocurrency surged to more than $100,000 for the first time. The digital asset held it losses after news that Donald Trump had named David Sacks as a White House czar for crypto and artificial intelligence.

In Asia, data set for release includes an interest rate decision in India and foreign reserves for Malaysia. November reserves data for China may also be released as soon as today.

Rates Outlook
A stronger headline US nonfarm payroll figure would be warmly welcomed by markets, supporting a theme of normalization rather than a deterioration on the jobs front, according to Oscar Munoz and Gennadiy Goldberg at TD Securities.

“We expect a stronger reading to initially lead to a significant bear-flattening reaction, but see a likelihood that the initial knee-jerk is pared back after markets assess the details,” they noted. “We remain buyers of duration on dips and will look to higher yields as a possible entry point to reestablishing longs.”

A survey conducted by 22V Research shows that 45% of investors believe Friday’s US payrolls data will be “mixed/negligible,” 32% said it will be “risk-off,” and 23% “risk-on.”

Leading indicators point to a roughly as-expected reading in the payrolls report, with headline job growth potentially coming in somewhere in the 180,000-240,000 range, albeit with a big band of uncertainty given the current global backdrop, according to Matthew Weller at Forex.com and City Index.

“With an interest-rate cut largely priced in at this point, the risks may be skewed slightly toward a bounce in the greenback if the jobs report revives the odds of a December pause,” Weller noted. “Though any market moves might be limited as the Fed’s policy decision is more around when rather than if it will pause rate cuts in the near future.”