Asian stocks fall with US jobs data in focus

Asian equities edged lower with US futures ahead of jobs data that will help shape the Federal Reserve’s outlook for interest rates.

Shares in Australia and Japan fell, while South Korea shares were little changed. Contracts for the S&P 500 fell for a second day after U.S. trading closed Thursday to observe a national day of mourning for former President Jimmy Carter.

Emerging market equities entered a correction after falling more than 10% from October highs, reflecting uncertainty over US policies and China’s growth prospects.

Treasuries advanced in early Asian trading after pushing the 30-year yield to the highest level since 2023 earlier this week. Several officials confirmed on Thursday that the Fed will likely keep interest rates at current levels for an extended period, only when inflation starts to fall again. Cools down meaningfully.

The dollar index gained from the previous session. The yen was steady around 158 per dollar. With the US jobs report looming as a potential catalyst for a sharp move in the currency, traders are on alert for possible Japanese support for the yen.

Sentiment remains cautious overall ahead of Friday’s US nonfarm payrolls data which is expected to show a slowdown in hiring in an otherwise strong labor market. Median estimates for the figures predict that 165,000 jobs were added to the US economy in December. The unemployment rate is forecast to hold steady at 4.2% and growth in average hourly earnings is seen cooling from a month ago.

“Despite the loss of momentum, we are still projecting relatively strong growth for job gains,” said Oscar Munoz and Gennady Goldberg at TD Securities. “We also look for the unemployment rate to remain unchanged at 4.2%, amid a possible loss of momentum in wage growth due to favorable seasonal factors.”

Elsewhere, the pound slipped to a more than one-year low and gilts sank on worries that the UK Labor government will struggle to rein in the deficit as borrowing costs rise.

In Asia, data sets for release include household spending for Australia and industrial production for India, while money supply figures for China could be released anytime on January 15.

Australia’s 10-year yield ticked higher in early trading.

US jobs

Friday’s US jobs data will offer a litmus test for the market’s “hawkish Fed pricing,” according to BMO Capital Markets strategists Ian Lingen and Weil Hartman. They noted that the bounce in Treasuries meant the pre-payrolls setup would be slightly more balanced – despite a bias in favor of a stronger performance from the employment figures.

“The resulting skew will leave the Treasury market ready to respond with strong bids in the event of a downside surprise rather than any selling pressure that might emerge on a strong report,” they noted.

Oil rose for a second day as US inventories fell, offsetting further signs of economic weakness in top importer China.