Asia stocks soar as markets await US jobs data

TOKYO, June 3 ― Asian shares advanced today as investors looked to US employment data that could add to or detract from the case for a Federal Reserve interest rate hike this month or in July.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 per cent, setting it up for a rise of 0.3 per cent for the week. Japan's Nikkei gained 0.2 per cent, paring losses for the week to 1.5 per cent.

Chinese shares were mixed, with the CSI 300 index little changed, while the Shanghai Composite slipped 0.2 per cent, putting both on track for weekly gains of about 3.5 per cent.

Hong Kong's Hang Seng index climbed 0.3 per cent, set for an advance of 1.7 per cent for the week.

Markets expect US employment data due at 1230 GMT to show a non-farm payroll increase of about 164,000 and 0.2 per cent rise in average wage earnings in May.

The data will be followed by a speech from Federal Reserve Chair Janet Yellen on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15.

“If we see a job figure that is largely in line with market consensus and if Yellen maintains a positive tone on rate hikes, I think the chance of a rate hike in June is pretty high,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Currently US money market futures are pricing in only about 20 per cent chance of a hike in June and 60 per cent by July.

Ahead of the two key events, Wall Street shares held firm, with the S&P 500 gaining 0.28 per cent to 2,105.26, mostly led by 1.3 per cent rises in the healthcare sector.

It now only needs to rise about 1 per cent to set a closing record.

In recent weeks global markets have been puzzling over what the Fed will do in the near term as relatively upbeat US data have been eclipsed by a still-sluggish global economy and worries over the risk of Britain exiting the European Union.

“Markets are pricing in smaller chances of a hike partly because of worries about 'Brexit'. That is also something that could influence the Fed,” Ichikawa added.

The uncertain global backdrop was underlined by the European Central Bank, which yesterday predicted consumer price growth would remain below target through 2018 as it struggles with cheap energy feeding into the price of other goods and services.

The ECB kept its negative rates unchanged, with President Mario Draghi saying stimulus from previously approved and yet to be implemented measures were expected to work its way through the system.

German debt yield hit a three-week low of 0.109 per cent ysterday after the ECB gave a cautious economic outlook.

The euro was little changed at US$1.115 (RM4.62) today, after sliding from this week's high of US$1.1221 touched early yesterday.

Against the yen, it last stood at 121.38 after falling to a three-year low of 121.065 yen in the previous session.

The yen held steady at 108.915 per dollar, after hitting a two-week high of 108.525 yesterday, a move some market players attributed to disappointment over a lack of a clear plan on stimulus from Japanese Prime Minister Shinzo Abe. It is poised for a gain of 1.3 per cent for the week.

The yen tends to strengthen when there is bad news on the economy because it is often used as a funding currency for investment in higher-yielding riskier assets.

The dollar index, which tracks the greenback against a basket of six major peers, was flat at 95.565.

Oil prices were supported, with international benchmark Brent futures continuing to trade above the US$50 a barrel level seen yesterday for the first time in seven months, after the latest drawdown in US crude stockpiles offset OPEC's failure to set a ceiling for its output.

Brent was steady at US$50.10, headed for a rise of 1.6 per cent for the week.

US West Texas Intermediate (WTI) crude futures was also flat at US$49.19 a barrel. It had tumbled more than US$1 earlier in the week, which set it up for a loss of 0.3 per cent for the week.

OPEC failed to agree on a clear oil-output strategy yesterday as Iran insisted on steeply raising its own production, although Saudi Arabia's new oil minister promised not to flood the market and sought to mend fences within the organisation. ― Reuters

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