Share markets were subdued in Asia on Monday as investors braced for a data-packed week culminating in a U.S. jobs report that could decide whether a rate cut expected this month will be regular or super-sized.
A holiday in the United States and Canada made for thin liquidity, while wins for far-right parties in German state elections added a fresh layer of political uncertainty.
The dollar clung to much of the gains made on Friday after upbeat spending figures led markets to trim the chance of a half-point easing from the Federal Reserve.
Futures are 100% priced for a cut of 25 basis points on Sept. 18, and imply a 33% probability of 50 basis points. They also have 100 basis points of cuts priced in by 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.
Crucial for the Fed will be the payrolls report on Friday where analysts look for a rise of 165,000 in jobs and a dip in the unemployment rate to 4.2%.
“The risks going into this crucial release seem highly asymmetric as a solid report is very unlikely to derail the September cut,” said Barclays economist Christian Keller.
“In contrast, a weak report would likely validate the popular narrative that the U.S. economy and labour market are on the precipice, necessitating a fast and deep cutting cycle, leading to another sharp repricing.”
Fed Governor Christopher Waller and NY Fed President John Williams happen to be speaking after the job data, giving the market a near-instant reaction.
Also important this week will be the ISM surveys, JOLTS job openings and ADP employment, trade and the Fed’s Beige Book.
Those risks kept investors cautious with S&P 500 futures off 0.1% and Nasdaq futures down 0.2%.
DOLLAR FINDS SUPPORT
EUROSTOXX 50 futures were flat, while FTSE futures added 0.3%.
Asian markets struggled to follow Friday’s rally on with Japan’s Nikkei erasing early gains to stand almost unchanged, having jumped 8.7% last week.
Source: Reuters
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