Asian shares and bonds rallied on Thursday as investors looked ahead to fresh US economic data and central bank comments for clues on whether the Federal Reserve will raise interest rates this month.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5% after US stocks ended the previous session with modest gains, while Japanese government bond yields pulled back from historic highs following an overnight recovery in US Treasuries.
The immediate focus is Friday’s US nonfarm payrolls report after weaker-than-expected private employment data for August. Fed Governor Christopher Waller is also due to speak, following New York Fed President John Williams’ comments that appeared to temper expectations of a rate hike this month.
Markets have nevertheless increased their bets on a September rate increase, with traders now pricing roughly a two-in-three chance of a 25-basis-point hike, up from 37% a week earlier, according to CME Group’s FedWatch tool.
Williams said on Wednesday that rising long-term bond yields reflected a solid economy, adding that he was still gathering information before making his next policy decision.
The dollar index slipped 0.05% to 99.54, while the euro edged up 0.02% to US$1.1589. The yen strengthened 0.07% to 158.59 per dollar after surging 0.9% in the previous session.
US Treasury yields also eased from multi-year highs. The benchmark 10-year Treasury yield fell 0.99 basis point to 4.784%, while Japan’s 30-year government bond yield dropped 10 basis points to 4.065%, retreating from a near-record high ahead of a Japanese government auction of super-long debt.
Oil prices edged lower as investors continued to assess the risk of renewed military escalation between the US and Iran. US crude fell 0.3% to US$90.74 a barrel while Brent slipped 0.44% to US$95.21.
The latest US-Iran attacks have revived concerns over a wider regional escalation and its potential impact on energy supplies, adding another layer of uncertainty for central banks already grappling with persistent inflation pressures.
“If this war were to be put to bed, then that would certainly be something very positive to bring yields back down again across the board,” said Gavin Friend, senior markets strategist at NAB.
“It would ease a lot of the tensions because central banks could get that back to thinking about normal policy considerations after a time.”
Meanwhile, spot gold rose 0.32% to US$4,400.47 an ounce while spot silver gained 0.51% to US$65.65.
Markets are also watching policy decisions from the European Central Bank and Bank of Japan as investors assess how far major central banks may be prepared to tighten policy amid persistent inflation.
Data released Thursday showed Japan’s services sector expanded at its fastest pace in five months in August, adding to signs that the economy remains resilient enough to withstand another BOJ rate hike.
In early European trading, Euro Stoxx 50 futures slipped 0.02%, German DAX futures eased 0.01% and FTSE futures fell 0.1%. S&P 500 e-mini futures were little changed at 7,676.3.
Reuters
