Shares were mixed in Asia on Thursday after Wall Street returned to winning ways on softer-than-expected jobs data and minutes that showed some Federal Reserve officials were open to cutting interest rates at their meeting in last month.
The readings boosted optimism that the central bank will begin to ease its long-running campaign of monetary tightening, with analysts saying the main debate is how big the move will be and how many more will follow.
It also came just days before Fed chief Jerome Powell was due to give a much-anticipated speech at the annual central bankers’ conference in Jackson Hole, Wyoming, where it is hoped he will hint at a cut.
The latest round of buying came after Labor Department data revealed that US employers added about 68,000 fewer jobs per month in the year to March than initially estimated.
US jobs data shows weaker than expected market
The reading hit on the fact that the labor market had softened — at the same time inflation was falling — enough for policymakers to start cutting borrowing costs.
Meanwhile, minutes from the Fed’s July policy meeting showed most members saw it as “appropriate” to cut in September, while some saw “a reasonable case for reducing the target range by 25 basis points at this meeting or that they could have supported such a decision.”
Observers said the minutes made a cut almost certain, with debate now over whether it would be 25 or 50 basis points.
Investors are pricing in more than one percentage point of cuts by the end of the year, according to Bloomberg News.
But the Fed meeting came ahead of a jobs report that came in so short of expectations that it helped trigger a sell-off across markets and fuel fears of a recession, Ray Attrill at National Australia Bank noted.
The rise in UK debt is limiting the fiscal options for the new government
That, he said, “will no doubt have reinforced those feelings” about the cut.
“Whether it means the … (September) meeting could still lead to a 50-rather-than-25-basis-point cut will undoubtedly depend on both the August nonfarm payrolls report due on Sept. 5 and the data about the inflation that will come between now and the meeting.” he added.
“The former will need to at least mimic (or exceed) July’s softness, and the latter will prove too comforting to lead the Fed to a 50 basis point cut.”
And independent analyst Stephen Innes warned the jobs review was close to the “worst-case scenario” and a “wake-up call”.
“The resilience of the economy remains key – if it remains stable, the stock market can continue its rise,” he said.
“But here’s the kicker: everything from the scale of Fed cuts to the actual strength of the US economy could come crashing together in a classic ‘be careful what you wish for’ scenario when the next (jobs) report comes out.” .
Asia trails Wall St lower as traders halt Fed-fueled rally
While all three major indexes on Wall Street rose — with the S&P 500 within touching distance of a record — Asian markets moved positively.
Tokyo, Hong Kong, Sydney and Manila rose while Shanghai, Singapore, Seoul, Wellington and Taipei slipped.
In currency markets, the dollar remained under pressure from expected rate cuts, while investors also looked ahead to Bank of Japan chief Kazuo Ueda’s questioning from lawmakers after this month’s rate hike and hawkish comments that sparked panic in markets.
Keys around 02:30 GMT
Tokyo – Nikkei 225: UP 0.6 percent at 38,190.85 (break)
Hong Kong – Hang Seng Index: UP 0.2 percent at 17,425.61
Shanghai Composite: DOWN 0.2 percent at 2,850.44
Dollar/yen: UP to 145.45 yen from 145.22 yen on Wednesday
EUR/USD: DOWN at $1.1143 from $1.1151
GBP/USD: DOWN to $1.3084 from $1.3087
Euro/pound: DOWN to 85.16 pence from 85.18 pence
Asian markets fluctuate ahead of key earnings and Powell
West Texas Intermediate: DOWN 0.4% to $71.63 a barrel
Brent North Sea crude: Down 0.3% at $75.83 a barrel
New York – Dow: UP 0.1 percent at 40,890.49 (close)
London – FTSE 100: UP 0.1 percent at 8,283.43 (close)
Source: AFP