(Bloomberg) — Asian equities were poised for a muted open on Friday as Treasuries stemmed a selloff ahead of US jobs data that will help shape the outlook for Federal Reserve rates.
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Futures for Australian shares rose, while those for Japan and Hong Kong were little changed. S&P 500 contracts edged lower Thursday as US trading was closed to observe a national day of mourning for former President Jimmy Carter.
Treasuries stabilized in a shortened trading session, following a rout that drove 30-year yields to the highest since 2023. The action curtailed the heavy selling since late last year that has pressured US yields higher, reflecting some uncertainty about the path ahead for US rates. An index of the dollar climbed Thursday.
The moves followed signs from Fed officials on Thursday that the central bank will slow its approach to rate cuts. Several officials confirmed that the Fed will likely hold interest rates at current levels for an extended period, only cutting again when inflation meaningfully cools.
Boston Fed President Susan Collins said Thursday a slower approach to adjusting interest rates is merited now as officials confront “considerable uncertainty” over the US economic outlook. The view was echoed by colleagues from other reserve banks and by Governor Michelle Bowman.
The muted action also reflects caution ahead of Friday’s US nonfarm payrolls data that’s expected to show a slowdown in hiring in an otherwise robust labor market. Median estimates for the figures forecast that 165,000 jobs were added to the US economy in December, as the labor market moved beyond distortions caused by hurricanes and strike activity in previous months.
“While losing momentum, we are still projecting a relatively firm increase for job gain,” said Oscar Munoz and Gennadiy Goldberg at TD Securities. “We also look for the unemployment rate to stay unchanged at 4.2%, amid a likely loss of momentum in wage growth owing to favorable seasonal factors.”
Elsewhere, the pound slipped to a more than one-year low and gilts sank on concern the UK’s Labour government will struggle to keep the deficit in check as borrowing costs surge.
In Asia, data set for release includes household spending for Australia and industrial production for India, while money supply figures for China may be released any time though January 15.
Story continues
Australia’s 10-year yield ticked higher in early trading.
US Jobs
Friday’s US jobs data will offer a litmus test for the market’s “hawkish Fed pricing,” according to strategists Ian Lyngen and Vail Hartman at BMO Capital Markets. They noted that the implication from the bounce in Treasuries is that the pre-payrolls setup will be slightly more balanced – despite a bias favoring a strong showing from the employment figures.
“The resulting skew will leave the Treasury market poised to respond with a stronger bid in the event of a downside surprise than any selling pressure that might emerge on a strong report,” they noted.
Meanwhile, the unemployment rate is forecast to hold steady at 4.2% and average hourly earnings growth is seen cooling a touch from a month earlier.
“We expect the Fed would require a clear miss in key dimensions to spur a rate cut this month (payroll growth well below 100,000 and a jobless rate above 4.3%) versus proceeding with the hold that is currently well priced in,” said Andrew Husby at BNP Paribas Securities.
Some of the main moves in markets:
Stocks
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Nikkei 225 futures were little changed as of 7:16 a.m. Tokyo time
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Hang Seng futures were little changed
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S&P/ASX 200 futures rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0301
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The Japanese yen was little changed at 158.12 per dollar
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The offshore yuan was unchanged at 7.356 per dollar
Cryptocurrencies
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Bitcoin fell 0.3% to $91,785.45
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Ether fell 0.3% to $3,200.15
Bonds
This story was produced with the assistance of Bloomberg Automation.
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