By Stella Qiu
SYDNEY (Reuters) – Asian shares held on to tight ranges and the dollar extended losses on Friday, as investors remained on edge ahead of U.S. jobs data that could determine the size and speed of coming interest rate cuts in the world’s largest economy.
Currently, oil prices are in their worst week in more than a year, hovering just above a critical chart level, with their near-term fate hinging on the payroll report due later in the day. [O/R]
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2%, after falling 2.3% so far this week. The Nikkei fell 0.1% and was 3.9% lower this week.
Chinese stock markets opened mixed, while Hong Kong’s Hang Seng was flat.
However, jittery markets caused Nasdaq futures to fall 0.6%, while S&P futures fell 0.3%.
The Japanese yen is vulnerable to a sharp decline after this week’s 2% rally and was last 0.1% higher at 143.27 per dollar.
Much is riding on the US non-farm payrolls report after Federal Reserve Chairman Jerome Powell said policymakers do not welcome further weakening in the labor market, laying the groundwork for a rate cut in September.
Analysts expect an increase in the number of new jobs by 165,000 and a drop in unemployment to 4.2%.
However, risks are now tilted to the downside after weak job postings and weaker private sector job growth led markets to increase the odds of a Fed rate cut by half a point to 42% this month.
Influential Fed Governor Christopher Waller and New York Fed President John Williams will speak after the jobs data, prompting market reaction almost immediately.
Analysts at ING said that even if payroll figures were in line with expectations, markets could still scale back the likelihood of a 50 basis point cut.
“We suspect the market is actually positioned for a number below 100,000. If we don’t get that kind of validation for material slowdown, yields will be under pressure to rise for a while,” said Padhraic Garvey, regional head research. America, at ING.
Bonds rose earlier this week, although gains could reverse quickly depending on payroll data. Two-year government bond yields fell 17 basis points so far this week to 3.7520%, the lowest level since early 2023.
The 10-year yield fell 18 basis points to 3.7330%, with the two-year spread on the verge of turning positive.
Oil is set for its worst week since October 2023 as demand concerns weighed against a big drawdown in US inventories and a slowdown in production increases by OPEC+ producers. [O/R]
The supply problems have not led to a rise in crude oil prices. Brent crude futures were steady on Friday, up 0.2% to $72.8 a barrel, but down 7.6% so far in the week.
They were stuck near a key range of $70 to $71, a break of which would open the way to levels not seen since late 2021.
Gold was flat at $2,514 an ounce, just below its record high.
In deal news, Japanese retail giant Seven & i Holdings said Friday it had rejected Alimentation Couche-Tard’s $38.5 billion Canadian bid for the company because the proposal was not in the interests of shareholders.
(Reporting by Stella Qiu; Editing by Sam Holmes)