Asian shares grapple for recoveries amid talks of Fed Pause
Markets also face a test from U.S. payrolls data later in the session amid speculation the economy was heading for a tough patch after years of solid growth.Devdiscourse News Desk | Updated: 07-12-2018 08:25 IST | Created: 07-12-2018 08:10 IST
Asian shares fought to sustain the slimmest of recoveries on Friday amid speculation the Federal Reserve might be "one-and-done" with U.S. rate hikes, while oil fell anew as producers bickered over the details of an output cut.
Japan's Nikkei added 0.2 percent and Chinese blue chips 0.3 percent. E-Mini futures for the S&P 500 started firmer but were last down 0.1 percent. There was no escaping concerns over Sino-U.S. relations after the arrest of smartphone maker Huawei Technologies Co Ltd Chief Financial Officer Meng Wanzhou threatened to chill talks on some form of trade truce.
Federal Reserve Chairman Jerome Powell emphasised the strength of the labour market in remarks made late Thursday.
Economists polled by Reuters forecast jobs rose by 200,000 in November after surging 250,000 in October.
"A view has developed of U.S. growth normalising a little faster than expected from the fiscal 'sugar rush', while inflationary pressures remain contained given the sharp fall in the oil price," said National Australia Bank economist Tapa Strickland.
"Payrolls will be very important in helping to validate whether the economy is indeed slowing faster than expected."
The mood in risk-asset markets brightened a little after the Wall Street Journal reported Fed officials are considering whether to signal a new wait-and-see mentality after a likely rate increase at their meeting in December.
The news helped Wall Street pare steep losses and the Dow ended Thursday down 0.32 percent, while the S&P 500 lost 0.15 percent. The Nasdaq managed to advance 0.42 percent.
Yields on two-year notes fell a huge 10 basis points at one stage on Thursday and were last at 2.77 percent.
Investors also steamrolled the yield curve to its flattest in over a decade, a trend that has historically presaged economic slowdowns and even recessions.
"The sort of flattening of the yield curve that we have seen recently usually indicates that investors think the Fed is nearing the end of a tightening cycle, and that rate cuts may even be on the horizon," argued analysts at Capital Economics.
The seismic shock spread far and wide. Yields on 10-year paper sank to the lowest in six months in Germany, almost 12 months in Canada and 16 months in Australia.
The sea change in expectations took a toll on the U.S. dollar as bulls had been counting heavily on a steady widening rate differential to propel the currency.
The greenback eased against a basket of currencies to 96.801 , and fell to 112.70 yen from a 113.85 high at the start of the week. The euro was up around 0.5 percent on the week so far at $1.1376.
In commodity markets, gold firmed to near a five-month peak as the dollar eased and the threat of higher interest rates waned. Spot gold stood at $1,238.44 per ounce.
Oil was less favoured, however, falling further as OPEC delayed a decision on output cuts while awaiting support from non-OPEC heavyweight Russia.
Brent futures slipped another 47 cents to $59.59 a barrel, while U.S. crude lost 31 cents to $51.18.