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GLOBAL MARKETS-Stocks climb in calm before potential US payrolls storm

by Clarence Jones

Title: Bond Selling Lull in Asia Trade May Be Short-lived: Investors Await US Jobs Data

Introduction

Amidst a lull in bond selling, investors in Asia are cautiously awaiting the release of U.S. jobs data, which could potentially influence interest rate decisions. Gaining some respite from sliding oil prices, markets are keeping a close eye on the bond market and the potential impact of labor market data on the direction of interest rates.

Asia-Pacific Shares and Currency Markets Remain Steady

On Friday, as bond prices stabilized, the MSCI’s broadest index of Asia-Pacific shares outside Japan saw a modest increase of 0.8%. Currency markets similarly experienced steadiness, with the dollar hovering just below recent highs ahead of the release of labor market data. Tokyo’s Nikkei index remained flat, indicating the caution of investors before the jobs report.

Uncertainty Surrounding U.S. Economic Data

Market sentiment remains cautious due to mixed U.S. economic data. Investors are particularly concerned that signs of economic resilience could prolong the current high interest rates or even lead to further hikes. As a result, 10-year U.S. Treasury yields have increased by 55 basis points in just five weeks.

Economists Predict Moderate Job Growth

Economists surveyed by Reuters anticipate an addition of 170,000 U.S. jobs in September. The unemployment rate is also projected to decrease slightly to 3.7%. However, investors are wary of a strong jobs number increasing bond selling and pushing the dollar higher, stimulated by both rising yields and the perception of greenbacks as a safe-haven currency.

Record-Breaking Dollar Performance

The dollar’s remarkable 12-week rally against the euro has put the common currency near its 11-month low. The dollar index is set to equal its previous record of a 12-week winning streak achieved in 2014. The yen, however, has shown some resistance, despite speculation that Japanese authorities may have intervened following a sudden jump in the currency’s value during London afternoon trading on Tuesday.

Market Response and Observations

Despite initial speculation of intervention, Japanese money-market data showed no unusual activity that might have been expected if yen intervention had taken place. Nonetheless, the incident has left traders vigilant. As a result, the yen remained steady at 148.5 per dollar.

Further Market Observations and Future Outlook

Ten-year U.S. Treasury yields remained at 4.72%, while gold prices stabilized at $1,822 per ounce after experiencing nine consecutive days of losses driven by rising global bond yields. Analysts anticipate temporary market stability as investors await the release of labor market data and next week’s U.S. Treasury supply and Consumer Price Index (CPI) data. If the labor market data proves to be strong, pressure on yields is expected to resume, possibly leading to further interest rate hikes.

Conclusion

While a temporary lull in bond selling has provided some relief to Asian markets, investors are anticipating the release of U.S. jobs data and its potential implications on interest rates. Mixed economic data and the possibility of stronger labor market numbers may sway bond market sentiment, sparking renewed selling and an increase in the strength of the U.S. dollar.

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