Asian shares climbed on Friday as investors took comfort from Federal Reserve Governor Christopher Waller’s softer stance on interest rates, while markets turned their attention to the latest US jobs data for clues on the Fed’s next move.
Waller said recent data showed signs of disinflation and that he would favour keeping rates steady at this month’s policy meeting if upcoming reports reinforced that trend. Markets subsequently cut the implied probability of a September rate hike to around 50% from about 63% a day earlier.
“Waller is pushing back against the thrust of the argument made by Warsh last week that there is little evidence that underlying inflation has moved lower,” analysts at JPMorgan said in a note.
“We believe that Chair Warsh will deliver a hike if he advocates for it. Absent his advocacy, Governor Waller’s speech reinforces our view that the bar for data to sway the data-dependent majority to hike this month remains elevated.”
The MSCI Asia-Pacific index excluding Japan rose 1%, while Japan’s Nikkei gained 0.8%. Chinese blue-chip stocks climbed 1% and South Korea’s KOSPI advanced 1.1%.
Attention now turns to US nonfarm payrolls, with economists expecting 56,000 jobs to have been added in August after a surprise fall of 23,000 in July. The unemployment rate is expected to remain at 4.1%.
The softer US rate outlook also eased pressure on bonds, with two-year Treasury yields holding at 4.3381% after falling overnight. Ten-year yields stood at 4.7620%.
Meanwhile, the dollar remained under pressure at 98.96 against major currencies, while the yen strengthened to around 155.70 per dollar as traders increased bets on a BOJ rate hike this month.
Reuters
