Stocks lose momentum as investors close in on US jobs, Fed

By Tom Westbrook

SINGAPORE (Reuters) – Asian shares fell on Wednesday as a stellar rally in global shares paused for breath as bond yields and the dollar fell ahead of U.S. economic data and speeches from policymakers, which waiting to argue for lowering interest rates.

The S&P 500 posted eight sessions of gains with a 0.2% drop overnight. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent.

Hong Kong’s Hang Seng fell 1.4 percent, with JD.com down 11 percent after Bloomberg News reported that major shareholder Walmart plans to sell its large stake.

Japan’s Nikkei fell 1 percent at the open as a rebound from its early August crash faces resistance around the 38,000 level and more yen gains hurt sentiment.

“Selling itself has largely corrected, and the recession scare has given way again to hopes of a soft landing,” Bank of Singapore analyst Moh Siong Sim said.

“But now we’re back to square one and … the market needs validation before it can be more relaxed, and that validation has to come from the data.”

Later on Wednesday, preliminary revisions to US labor force data are due, and a major downward revision is expected, which would support interest rate cuts. On Thursday, the US and global PMI surveys will be released.

The dollar’s slide launched gold to record highs and pushed the yen back to 145.48 per greenback, a 1.6 percent gain for the week so far and about 11 percent higher than last month’s 38-year low.

The euro is up nearly 3% for the month of August so far and, at $1.1130 in morning trade, is its highest since early December and testing important chart levels. (FRX/)

Interest rate futures priced a 25 basis point cut in the US next month, with a 1/3 chance of a 50 basis point cut. Almost 100 bps in discounts are priced this year, and another 100 bps next year.

“The greenback’s current softer tone is likely to stem mainly from expectations that easier Fed policy is increasingly imminent,” Rabobank strategist Jane Foley said in a note.

“This raises the question of whether Fed rate cut hopes are still overblown and the risk of (euro/dollar) falling back below $1.10 in the near term.”

Federal Reserve Chairman Jerome Powell is scheduled to speak at the Jackson Hole Symposium in Wyoming on Friday. The Australian and New Zealand dollars have made significant recent gains, with the Aussie at $0.6747 and the Kiwi at $0.6157. (AUD/)

Sentiment kept bond markets buoyant, with 10-year U.S. Treasury yields falling to 3.81 percent, while two-year yields were at 3.9962 percent.

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Commodity prices steadied, with Brent crude futures at $77.17 a barrel and Dalian iron ore hitting a low after a Bloomberg report that China plans to allow local governments to buy unsold homes in the latest measure to support the real estate market.

China is the world’s largest consumer of steel, and markets are sensitive to any sign that construction might be back on track. Shares in major miners were flat in Australia.

Gold prices were at $2,516 an ounce, just below record levels hit on Tuesday.

In emerging markets, the central banks of Thailand and Indonesia meet to set rates on Wednesday, although neither is expected to start cutting rates before the Federal Reserve.

(Editing by Shri Navaratnam)