Source: AFP
Asian shares rallied on Friday as investors heaved a sigh of relief after US jobs data eased concerns that the world’s top economy could be headed into recession, bringing a painful week to a positive end.
Stocks across the globe have seen wide swings since a cautious gauge of the US labor market came in well below forecasts and sparked fears the Federal Reserve may be waiting too long to cut interest rates.
Last Friday’s nonfarm payrolls report came days after the U.S. central bank hinted at a September cut and the Bank of Japan announced its second hike in 17 years, hinting at more to come.
Those decisions sent the yen soaring to just below 142 to the dollar and prompted a rapid easing of the so-called carry trade in which traders take advantage of the weaker currency to buy higher-yielding assets such as stocks.
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Stocks tumbled on Monday, with Tokyo’s Nikkei 225 down more than 12 percent in its biggest one-day drop since Black Thursday in 1987, with a stronger yen hitting exporters.
But while investors are still reeling from uncertainty, they managed to recoup much of the damage they suffered earlier in the week, helped by the BoJ’s flippant comments that it would not raise interest rates while markets were in turmoil.
Confidence was given a further boost on Thursday by news that fewer people than expected had applied for unemployment benefits last week, easing worries about the economy.
All three major Wall Street indexes jumped, with the S&P 500 enjoying its best day since November 2022.
And Asia happily followed on Friday.
Tokyo rallied 1.6 percent, helped by a weaker yen — it was above 147 to the dollar on Friday — while Hong Kong, Sydney and Seoul were also more than a percent higher, while Taipei increased by 3%.
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Shanghai, Wellington and Manila were also in positive territory.
Data showing Chinese inflation rose more than expected in July provided a much-needed upbeat view of the country’s stuttering economy.
“The return to initial claims is consistent with the only modest deterioration in permanent layoffs in the US labor market,” said National Australia Bank’s Taylor Nugent.
He added that the unemployment rate was due to an increase in the labor force and an increase in temporary layoffs.
“Despite the volatility in claims data, especially at this time of year, the data helped ease fears of a more rapid deterioration in the labor market.”
Traders are now awaiting the release of US inflation data next week as they try to judge the Fed’s interest rate plans after facing calls for a cut ahead of next month’s meeting.
Slowing prices and an easing labor market have raised bets for at least one cut before January.
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But Kansas City Fed President Jeffrey Schmidt said that while the recent softer readings on inflation were “encouraging,” he wanted to see it return closer to the bank’s 2 percent target before agreeing to a cut.
“We’re close, but we’re not quite there yet,” he told the Kansas Bankers Association. “The path of politics will be determined by the data and the strength of the economy.”
Despite last Friday’s data, he added that the labor market remains healthy.
“It is important to note that many other indicators show continued strength,” he said.
Keys around 02:30 GMT
Tokyo – Nikkei 225: UP 1.6 percent at 35,380.23 (break)
Hong Kong – Hang Seng Index: UP 1.6 percent at 17,154.24
Shanghai – Composite: UP 0.4 percent to 2,882.11 points
Dollar/yen: UP to 147.25 yen from 147.20 yen on Thursday
EUR/USD: DOWN to $1.0917 from $1.0921
GBP/USD: DOWN to $1.2747 from $1.2750
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Euro/pound: UP to 85.65 pence from 85.63 pence
West Texas Intermediate: FLAT at $76.20 a barrel
Brent North Sea crude: FLAT at $79.16 a barrel
New York – Dow: UP 1.8 percent at 39,446.49 (close)
London – FTSE 100: Down 0.3% to 8,144.97 (close)
— Bloomberg News contributed to this story —
Source: AFP
