Asian stocks rally before U.S. jobs test; yen slides
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By Kevin Buckland
TOKYO (Reuters) – Asian stocks rose on Friday, while the dollar surged to a fresh monthly high as investors braced for key US jobs data later in the day that should offer clues as to how aggressively the US Federal Reserve is tightening policy will.
The yen continued to fall from a seven-month high for a fourth straight day, even as the 10-year Japanese government bond yield hit the central bank’s new policy ceiling of 0.5%, a level not seen since July 2015.
Japan’s Nikkei ended the day 0.59% higher, while South Korea’s KOSPI gained 1.01%. Australia’s equity benchmark gained 0.65%.
Mainland China blue chips gained 0.18%, gaining every day this week as China abruptly eased its ultra-tight COVID-19 restrictions on travel and activities.
However, Hong Kong’s Hang Seng slipped 0.43%, falling from Thursday’s six-month high.
MSCI’s broadest index of Asia-Pacific ex-Japan stocks rose as much as 0.94% at times to hit a 4-1/2-month high.
“While reopening is likely to be a bumpy proposition amid rising COVID-19 cases and increasingly stretched healthcare systems, our economists expect growth momentum to pick up across Asia, led by China,” HSBC strategists wrote in a note to clients .
The prospects for higher Chinese growth also buoyed Crude Oil. Brent crude futures were up 94 cents, or 1.2%, to $79.63 a barrel, while US West Texas Intermediate crude futures were up 91 cents, or 1.2%, to $74.58 a barrel.
Futures for Germany’s DAX signaled a 0.53% gain on the restart, while UK FTSE futures signaled a 0.2% gain.
US E-mini stock futures rose 0.34%, suggesting a small bounce after the S&P 500 fell 1.16% overnight.
Wall Street sold off on fears that a resilient job market would push the Fed to hike rates longer after data released on Thursday showed a stronger-than-expected increase in personal payrolls and a drop in jobless claims.
“There are concerns that the job market is showing no signs of slowing down,” making financial markets “very nervous,” said Tony Sycamore, markets analyst at IG.
“But the important one will be tonight, and I don’t think the bogeyman with tonight’s number will be in the closet.”
Friday’s nonfarm payrolls are expected to show 200,000 jobs were added in December, slowing from November’s pace of 263,000, according to a Reuters poll of economists.
Two-year US Treasury yields rose to a more than two-month high of 4.497% overnight but fell to 4.4561% in Tokyo. The 10-year yield, which had risen to 3.784% in New York, fell to 3.7122%.
However, the US currency rose against its key rivals, primarily the Japanese yen, on Friday.
The dollar index, which measures the dollar against six counterparts including the yen and euro, rose 0.8% to 105.20, from 105.31 for the first time in a month.
The dollar index is up 1.64% this week, putting it on track for a streak of three weeks of losses. It’s shaping up for its best performance since late September.
The greenback rose 0.46% to 134.03 yen, hitting a fresh weekly high of 134.37. It is expected to gain 2.28% this week, its best reading since mid-October.
The Japanese currency rose to a seven-month strongest level of 129.51 per dollar on Tuesday, capping its rise as the BOJ unexpectedly increased the range it allows for the 10-year JGB yield to 50 basis points has expanded on both sides of zero.
The benchmark 10-year yield hit that limit at 0.5% on Friday.
“The 10-year yield of 0.5% isn’t a surprise considering the market is now anticipating another turnaround,” said Naka Matsuzawa, market strategist at Nomura.
The BOJ could widen the zero band for the 10-year JGB yield to 75 basis points within this year, he said, although an exit from negative interest rate policy for the overnight rate in 2023 is not likely, as it would have to be acknowledged by officials the inflation target of 2% was reached.
The euro was little changed at $1.0519, having previously fallen to $1.0511, a level last seen on December 12.
(Reporting by Kevin Buckland; Editing by Bradley Perrett and Sam Holmes)
