(Bloomberg) -- Japanese stocks rose after the nation’s new prime minister damped speculation about another interest-rate increase, weakening the currency. Oil gained for a third day on Middle East tensions.
The yen fell to a more than one-month low against the dollar, extending its 2% decline Wednesday, its worst day in more than two years. The slide was triggered by comments from Shigeru Ishiba, who said the economy isn’t ready for another hike. Bank of Japan official Asahi Noguchi is set to speak Thursday, potentially offering investors further clarity.
Hong Kong equities opened lower after their surge on Wednesday. Australian shares were little changed as were contracts for the S&P 500 after the index ended flat in the US session. Markets are closed in mainland China and South Korea.
“We think the rally can be sustained because there is more fiscal stimulus coming,” David Chao, global market strategist, Asia Pacific, for Invesco, said on Bloomberg Television. “Many foreign investors who have been sitting on the sidelines are very much thinking about whether to jump in.”
Renewed vigor in the dollar added to the pressure on the yen as stronger-than-expected ADP jobs data led traders to pare bets on aggressive Federal Reserve rate cuts. Swaps traders were penciling in some 33 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week.
Oil Rallies
Oil rose in Asian trading as investors await Israel’s response to Iran’s missile attack, with US President Joe Biden urging Israel to hold off from attacking Iran’s nuclear facilities.
An index of dollar strength was slightly higher, compounding gains from Wednesday as Treasury yields climbed. The 10-year yield rose five basis points to 3.78% after hitting a low of 3.69% in the prior session amid the flare-up of tensions in the Middle East. US yields were little changed in Asian trading, while Australian and New Zealand yields rose.
Data Wednesday showed US companies added more jobs than economists forecast last month, at odds with other indicators that show a cooling labor market. Friday’s nonfarm payrolls numbers will be the next critical reading on the health of workers and the US economy.
The “ADP employment number surprised to the upside, suggesting the labor market is bending but not breaking,” said Chris Larkin at E*Trade from Morgan Stanley. “Friday’s monthly jobs report will have the final word on the current jobs picture, and more than likely, on near-term market sentiment.”
US Jobs
The US nonfarm payroll report won’t take a half a percentage point cut off the table, according to Bank of America Corp. strategists led by Meghan Swiber. “Even if the labor market surprises to the strong side, pricing will still maintain optionality,” they wrote.
To Marc Rowan, the chief executive officer of Apollo Global Management Inc., the Fed’s aggressive policy easing threatens to overstimulate the economy.
“It is not clear we need more rate cuts,” he said in an interview with Bloomberg Television, pointing to ready financing and rising real estate prices.
Richmond Fed President Thomas Barkin said it was too early for the central bank to declare victory over rising prices. “While we have made real progress — there remains significant uncertainty on both inflation and employment,” he said.
Key events this week:
- US nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 10:30 a.m. Tokyo time
- Nikkei 225 futures (OSE) rose 2.6%
- Japan’s Topix rose 1.5%
- Australia’s S&P/ASX 200 was little changed
- Hong Kong’s Hang Seng fell 0.6%
- Euro Stoxx 50 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.1040
- The Japanese yen fell 0.4% to 147.00 per dollar
- The offshore yuan was little changed at 7.0385 per dollar
Cryptocurrencies
- Bitcoin rose 0.4% to $61,159.08
- Ether rose 0.3% to $2,391.73
Bonds
- The yield on 10-year Treasuries was little changed at 3.79%
- Australia’s 10-year yield advanced five basis points to 4.01%
Commodities
- West Texas Intermediate crude rose 1.2% to $70.92 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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