Asia moves steady, dollar ahead of jobs test By Reuters

By Wayne Cole

SYDNEY (Reuters) – Asian stock markets got off to a quiet start on Monday as investors braced for a data-packed week culminating in a U.S. jobs report that could decide whether a cut in the expected interest rate this month will be regular or very high.

A holiday in the United States and Canada generated thin liquidity, while victories for far-right parties in German state elections added a new layer of political uncertainty.

The dollar clung to gains on Friday after upbeat spending numbers prompted markets to discount the chance of a half-point easing from the Federal Reserve.

Futures are priced at 100% for a 25 basis point decline on September 18 and imply a 33% probability of 50 basis points. They also have 100 basis points of cuts through December and 120 basis points for 2025.

The Bank of Canada is expected to cut again on Wednesday, with markets implying a 22% chance of 50 basis points.

Key for the Fed will be Friday’s payrolls report, where analysts are looking for an increase of 165,000 jobs and a drop in the unemployment rate to 4.2 percent.

“Risks looming in this crucial release appear highly asymmetric, as a strong report is highly unlikely to derail September’s tapering,” Barclays economist Christian Keller said.

“In contrast, a weak report would likely validate the popular narrative that the U.S. economy and labor market are on the precipice, necessitating a quick and deep cut cycle, leading to another sharp revaluation.”

Fed Governor Christopher Waller and New York Fed President John Williams speak after the jobs data, giving the market almost instant reaction.

Also important this week will be ISM surveys, JOLTS job openings and ADP employment, trade and the Fed’s Beige Book.

Those risks kept investors cautious and fell 0.1 percent, while Nasdaq futures fell 0.2 percent.

DOLLAR FINDS SUPPORT

Asian markets largely followed Friday’s rally on Wall Street, rising 1.0 percent and adding to last week’s 8.7 percent gain. (.N)

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 percent, while shares in South Korea were flat.

Cash Treasuries were little traded on the holiday, while Treasury futures were little moved. Ten-year yields were at 3.914% after rising on Friday’s inflation and spending data. (US/)

This rise supported the US dollar at 146.55 yen, after rising 1.2% last week and now facing chart resistance around 148.54.

The euro was stuck at $1.1046 after losing 1.3% last week, political uncertainty in Germany not helping.

The European Central Bank (ECB) is seen as certain to cut rates by a quarter of a point next week following benign EU inflation figures.

“However, the path beyond is less clear, with financial markets currently pricing in about 1-1/2 cuts over the remaining two meetings of the year,” said Joseph Capurso, head of international economics at CBA.

“We have one more cut in 2024 after September, but let’s face it, it’s going to be a close call between one or two more cuts.”

The firmer dollar combined with higher bond yields pressured gold prices to $2,502 an ounce, below a recent low of $2,531.60. (EMPTY/)

Oil prices lost more ground as the market pondered the prospect of a supply increase from OPEC+ in October. (OR)

fell 41 cents to $76.50 a barrel, while it lost 38 cents to $73.17 a barrel.