Asian shares started the new month in the red on Monday after a court ruling threw another wrench into U.S. tariff policy and investors braced for a reading on U.S. jobs that could determine the course of rate cuts there.
A holiday in the United States made for thin conditions, though Wall Street and European futures were still trading with small gains after retreating on Friday.The dollar and bonds were little moved ahead of a busy week for data which includes surveys of manufacturing and services, and a range of labour numbers culminating in the August payrolls report on Friday.
Median forecasts are for an increase of 75,000, though estimates range widely from zero to +110,000 due to the uncertainty caused by July’s surprisingly weak report, while the jobless rate is seen ticking up to 4.3 per cent.Analysts also cautioned the August report has shown a bias to undershoot forecasts over the past decade. A result in-line or softer would cement market expectations for the Federal Reserve to cut rates at its meeting on September 17, which futures imply is a near 90 per cent probability.
“Although inflation and growth data don’t scream out for a rate cut, at this stage it would likely require a significant positive employment surprise to stop the Fed from moving forward, given their concern about the sharp recent deceleration in job growth,” said Michael Feroli, chief U.S. economist at JPMorgan.
The prospect of lower borrowing costs has underpinned Wall Street near record highs, and would be timely given September has been the worst performing month of the year for the S&P 500 over the past 35 years.
Early Monday, S&P 500 futures were up 0.2 per cent, while Nasdaq futures added 0.3 per cent. EUROSTOXX 50 futures firmed 0.3 per cent, while FTSE futures rose 0.1 per cent and DAX futures gained 0.3 per cent.
Japan’s Nikkei fell 0.9 per cent, tracking a drop in U.S. tech stocks on Friday, while South Korea’s market slipped 0.5 per cent.MSCI’s broadest index of Asia-Pacific shares outside Japan inched down 0.1 per cent, having hit a four-year high last week on the back of a bull run in Chinese stocks.
Trade uncertainty remained a drag after a U.S. Court of Appeals ruled many of President Donald Trump’s sweeping tariffs were illegal, but left them in place until mid-October awaiting an appeal to the Supreme Court.
The White House has other means to apply sectoral levies but it puts a question mark over trade agreements already reached or being negotiated. Talks with Japan have hit a stumbling block over rice, while negotiations with South Korea have bogged down.
“If the Supreme Court upholds the ruling, the Treasury would still need to return most of the now-close to $100 billion in additional customs duties collected over the past five months, and there is a danger that other countries would back-track on any preliminary agreements,” noted Paul Ashworth, chief North America economist at Capital Economics.
Reuters
