HONG KONG (Reuters) – Asian stocks went up on Friday before the U.S. jobs report, which will tell us more about the health of the world’s largest economy. Bond markets sent out warning signs, and oil traded near its lowest level since the Ukraine war began.
MSCI’s broadest index of Asia-Pacific shares outside of Japan went up by 0.74 percent. This was because index heavyweight TSMC went up by 3.2%, making up for ground it had lost earlier in the week because of tensions surrounding U.S. House of Representatives Speaker Nancy Pelosi’s trip to Taiwan.
This means that the regional index is likely to end the week in the black for the third week in a row, while Japan’s Nikkei gained 0.83 percent.
The EUROSTOXX 50 futures and the S&P 500 futures both increased by 0.2%.
But the main event of the day, U.S. employment data, hasn’t happened yet. Investors are waiting to see if the aggressive rate hikes by the U.S. Federal Reserve are starting to slow economic growth.
Non-farm payrolls are expected to have gone up by another 250,000 after going up by 372,000 jobs in June.
Last week, stocks and U.S. treasuries went up because the markets thought the Fed might raise rates less quickly because of worries about a recession and hopes that inflation would slow down. However, this week, many Fed policymakers have pushed back on such suggestions.
Prashant Bhayani, chief investment officer for Asia at BNP Paribas (OTC:BQY) Wealth Management, said, “We’re waiting to see a slowdown in the labour market. If we get a big miss, it will finally prove that the labour market is slowing, and we’ll see more rallies in U.S. treasuries. “
There are already signs of a slowdown in other asset classes.
Bhayani said, “The bond market says there’s a pretty good chance of a recession, but the stock market is focused on the labour market.”
Overnight, the part of the U.S. Treasury yield curve that shows the difference between the yields on two-year Treasury notes and 10-year Treasury notes reached 39.2 basis points, the largest difference since 2000.
People often think that an inverted curve means a recession is coming.
On Friday morning, the yield on a 10-year bond was 2.6936 percent and the yield on a 2-year bond was 3.0531 percent, leaving a gap of 36 basis points between the two.
Oil ended the day at its lowest level since February, before the war in Ukraine, which is another sign that growth may be slowing.
“Crude oil fell sharply because of fears of a recession, which made people worry about weaker demand,” said analysts at ANZ. The price drop was also partly caused by news on Wednesday that U.S. inventories rose last week.
In Asian trade on Friday, prices went up a little bit. Brent crude futures went up by 0.5% to $94.61 per barrel, while U.S. crude futures went up by 0.7% to $89.12 per barrel.
In the currency markets, the dollar index, which compares the U.S. dollar to six major peers, was at 105.93, up a little bit. Overnight, it had fallen by 0.6%, along with U.S. yields.
Sterling was down just a little bit against the dollar at $1.2142, after the Bank of England raised interest rates and said a long recession was coming to Britain. Overnight, the pound went up and down because of this news.
Gold on the spot market stayed at $1,790 an ounce.
(This story’s headline will be changed to get rid of extra words.)