Asian shares rose on Friday as investors awaited the latest US jobs figures, while comments from Federal Reserve governor Christopher Waller eased fears that the central bank could raise interest rates later this month.
Waller said recent economic data was showing signs of easing inflation and that he would be inclined to support keeping rates unchanged if figures due over the next fortnight confirmed the improvement.
His remarks helped trigger a recovery in government bonds after a sharp sell-off had pushed longer-term borrowing costs to multi-year highs. Traders also reduced the implied likelihood of a rate rise at the Federal Reserve’s September 15-16 meeting to about 50 per cent, down from roughly 63 per cent a day earlier.
Asian shares track Wall Street gains
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1 per cent, although it remained down 0.4 per cent over the week. Japan’s Nikkei gained 0.8 per cent, Chinese blue-chip shares rose 1 per cent and South Korea’s Kospi advanced 1.1 per cent.
The gains followed a strong session on Wall Street, where investors welcomed Waller’s more cautious stance on monetary policy. US and European equity futures were little changed as markets turned their attention to the August non-farm payrolls report.
Economists expect the US economy to have added 56,000 jobs last month, following an unexpected fall of 23,000 in July. The unemployment rate is forecast to remain at 4.1 per cent.
Other data released overnight showed activity in the US services sector had picked up in August, while a measure of prices paid rose to its highest level in three years. The Federal Reserve’s Beige Book also indicated that economic activity had edged higher in recent weeks.
Waller stressed that his position remained dependent on the incoming figures. The Federal Reserve’s next decision will also come after the release of August inflation data, with the governor warning that a renewed deterioration could still justify higher interest rates.
Treasury yields fell after his comments, led by shorter-dated debt. Two-year yields stood at 4.3381 per cent after dropping five basis points overnight, moving away from a 20-month peak of 4.4102 per cent.
The benchmark 10-year yield was little changed at 4.762 per cent after falling three basis points, while the 30-year yield declined two basis points to 5.2433 per cent.
The dollar weakened against major currencies, falling 0.6 per cent overnight and heading for a weekly decline of about 0.7 per cent. The retreat helped the yen, which has gained 2.6 per cent this week to trade at about 155.7 to the dollar.
Investors have also increased bets that the Bank of Japan could raise interest rates this month, with markets implying about a 75 per cent chance of a September move.
Oil prices remained close to six-week highs amid continuing uncertainty over the conflict involving the US and Iran and the future of shipping through the Strait of Hormuz. Brent crude was up about 7 per cent over the week at $95.52 a barrel, while gold held near $4,470 an ounce after rising 2 per cent overnight.
