(Bloomberg) — Stocks in Asia erased gains and US equity futures fell in holiday-thinned trading as investors assessed the Federal Reserve’s policy path following Friday’s US jobs data.
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MSCI Inc.’s Asia-Pacific equity index gave up a gain of as much as 0.3% as US stock contracts declined. A number of markets including Hong Kong and Australia remain shut for Easter holidays and trading volumes are expected to be light with activity shuttered Monday in most of Europe.
Treasury yields dropped across the curve in Asia after jumping Friday when the US monthly payrolls data boosted bets on a Fed rate increase in May. The numbers also eased concern the world’s biggest economy is heading for a recession.
The dollar strengthened against all its Group-of-10 peers, while the yen weakened for a third day. Investors are keeping a close eye on new Bank of Japan Governor Kazuo Ueda who will hold his inaugural press conference later Monday.
Oil steadied and gold fell below $20,000 as it headed for its biggest one-day drop in two weeks. Cryptocurrencies were little changed.
Chinese military drills around Taiwan, following the island’s president visiting the US, added to the sense of caution in Asian markets.
US payrolls rose at a pace of 236,000 in March, in line with forecasts, and followed an upwardly revised 326,000 advance in February. The unemployment rate dropped again to near record lows to 3.5%.
Swaps trading showed the odds for a quarter percentage point interest-rate increase at the Fed’s May meeting rose to about two in three, up from roughly 50-50 before the data landed. Investors have been aggressively pricing in rate cuts later this year as economic data falls short of estimates, suggesting the US economy is slowing.
“The Fed will still see the need for further cooling in the labor market,” Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote in a research note. “This week’s CPI and PPI data are likely to underscore the fact that inflation remains stubbornly high and so we look for the hawkish tilt in Fed comments to continue this week.”
The next major data point for the Fed is a report on consumer prices, due April 12. Fed officials will deliver their next rate decision on May 3.
OPEC+ revived inflation jitters by cutting production so the next round of US data will have to show noticeable easing from the services side as well “for investors to really take inflation concerns off the table,” Charu Chanana, market strategist at Saxo Capital Markets, wrote in a note. “We don’t think we are there yet.”
Key events this week:
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US wholesale inventories, Monday
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New York Fed President John Williams takes part in discussion hosted by the Economics Review at New York University, Monday
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China PPI, CPI, Tuesday
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IMF world economic outlook, global financial stability reports, Tuesday
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Chicago Fed’s Austan Goolsbee, Minneapolis Fed’s Neel Kashkari and Philadelphia Fed’s Patrick Harker speak at separate events, Tuesday
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Canada rate decision, Wednesday
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US FOMC minutes, CPI, Wednesday
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Richmond Fed’s Thomas Barkin speaks, Wednesday
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China trade, Thursday
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US PPI, initial jobless claim, Thursday
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US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
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Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 6:41 a.m. London time
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Nasdaq 100 futures fell 0.3%
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Japan’s Topix index rose 0.4%
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South Korea’s Kospi index rose 0.9%
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China’s Shanghai Composite Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro was little changed at $1.0896
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The Japanese yen fell 0.3% to 132.61 per dollar
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The offshore yuan was little changed at 6.8798 per dollar
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The Australian dollar fell 0.2% to $0.6656
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The British pound was little changed at $1.2407
Cryptocurrencies
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Bitcoin rose 0.5% to $28,276.62
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Ether rose 0.2% to $1,860.27
Bonds
Commodities
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West Texas Intermediate crude was little changed
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Spot gold fell 0.7% to $1,993.89 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee, Katie Greifeld and Liz Capo McCormick.
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