Stock markets across Asia got off to a rocky start Friday morning following a weaker-than-expected U.S. employment report that dampened hopes for a near-term interest rate increase by the Federal Reserve.
The MSCI index tracking Asia-Pacific shares outside of Japan swung between positive and negative territory before nudging up just 0.1%, coming off two straight days of losses. South Korea’s Kospi dragged on the broader regional index, reflecting steep drops in chipmaker stocks seen during U.S. trading. Meanwhile, S&P 500 e-mini futures and Nasdaq e-mini futures each gained 0.1%, while Japan’s Nikkei 225 fell 1%.
Data released Thursday showed U.S. job growth dropped off sharply in June, with payroll figures for the previous two months also revised downward — signs that the labor market is losing steam. The unemployment rate dipped to 4.2% in June from 4.3% in May, though the decline came as workers exited the labor force, pushing the workforce participation rate to its lowest point in over five years.
Analysts at Westpac noted in a research report that “the figures challenged the narrative that the Fed remains on track to hike in the second half of this year.”
The disappointing employment numbers cooled trader expectations for a rate hike in the near future and increased the likelihood that the Fed will leave rates unchanged until October. According to the CME Group’s FedWatch tool, Fed funds futures now reflect a 46.8% probability that the central bank will hold rates steady at its September 15-16 meeting — up from a 35.8% chance just one day earlier.
On Wall Street Thursday night, results were mixed. The S&P 500 finished flat, the Nasdaq Composite slipped 0.8%, but the Dow Jones Industrial Average climbed to a record closing high. U.S. markets will remain closed Friday in honor of the Independence Day holiday.
The U.S. dollar edged up 0.2% against the Japanese yen, trading at 161.435 yen as Asian markets opened, with overall trading volume thinned due to the holiday. The dollar recovered some ground after a volatile Thursday session, during which the yen surged briefly following a Reuters report that Japanese authorities had adopted a new strategy for their market interventions. The reason behind the yen’s sudden rally was not immediately clear.
The U.S. dollar index, which gauges the greenback’s value against six major currencies, held steady at 100.98 after sliding 0.5% the day before.
In commodity markets, Brent crude futures fell 0.4% to $71.49 per barrel when Asian trading resumed. Gold edged up 0.1% to $4,125.49.
In the cryptocurrency space, bitcoin slipped 0.4% to $61,306.45, while ether dropped 0.7% to $1,692.16.
