Dollar Under Pressure Into Key US Payrolls Report: Markets Wrap

(Bloomberg) — The dollar edged lower while US stock futures slipped as traders prepared for US jobs data that may determine the size of a Federal Reserve interest-rate cut this month.

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Asian stocks were mixed ahead of the numbers, with the regional benchmark heading for a weekly loss. US stock futures crept lower amid speculation traders are trimming some of their positions in advance of the report. Hong Kong stock trading was shut Friday morning due to a typhoon.

There’s limited event risk to be concerned about in Asia “so again the session will be defined by further pre-positioning ahead of US payrolls,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “Traders will use the time in front of the screens to review, massage and manage positioning and exposures and the possible cross-market volatility that can kick up.”

Treasury yields were little changed in Asia after falling Thursday, adding downward pressure on the greenback. The Bloomberg dollar index inched lower, heading for a third day of losses. Traders are expecting more warning signs about the labor market with whisper numbers among Bloomberg terminal users suggest an addition of just 155,000 jobs. The yen and emerging Asian currencies such as the Philippine peso and the Malaysian ringgit rose.

Interest-rate swap contracts show a roughly 35% chance that the Fed executes a jumbo 50-basis-point cut when it meets Sept. 17-18, but a quarter-point reduction is still favored by traders and remains the more popular call among economists.

Hong Kong is expected to scrap trading of its $4.9 trillion stock market for the rest of Friday as the city extends a storm warning due to Super Typhoon Yagi, which skirted the region overnight toward southern China.

Elsewhere in Asia, China may be facing new export controls on critical technologies by the Biden administration. Washington has cracked down on China’s ability to access cutting-edge technologies needed for artificial intelligence, over fears that advanced chips and components could lend Beijing a military edge.

Chinese brokerage stocks gained after two of the largest state-backed brokers said they are looking to combine. Analysts said the merger may encourage other firms to follow suit.

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Markets are keeping a close eye on China’s bond market as some government debt the central bank bought recently is now being sold in the secondary market, according to traders — a possible sign that authorities are once again intervening to curb a debt rally.

The US jobs report is expected to show payrolls increased by about 165,000, based on estimates. While above the 114,000 gain in July, average growth over the most recent three months would ease to a little more than 150,000, the smallest since the start of 2021. After the report, New York Fed President John Williams and Fed Governor Christopher Waller are scheduled to make comments.

“The danger in really ‘bad news’ is that even if the Fed is prepared to react aggressively, it might be too late to stave off real economic weakness,” said Steve Sosnick at Interactive Brokers. “But there is a worry that if the news is ‘too good,’ the Fed might be reticent to cut rates as fast as the market has come to expect.”

Oil headed for its biggest weekly loss in almost a year on concerns about soft demand and ample supply, even as OPEC+ delayed a planned increase in output by two months. Gold was little changed as traders digested the latest US data readings. Iron ore remained on track for its worst week since March, with few signs of a recovery for China’s steel market.

Key events this week:

• Eurozone GDP, Friday

• US nonfarm payrolls, Friday

• Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 12:16 p.m. Tokyo time

• Nikkei 225 futures (OSE) rose 0.1%

• Japan’s Topix fell 0.6%

• Australia’s S&P/ASX 200 rose 0.5%

• Hong Kong’s Hang Seng was little changed

• The Shanghai Composite was little changed

• Euro Stoxx 50 futures rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1113

• The Japanese yen rose 0.2% to 143.22 per dollar

• The offshore yuan was little changed at 7.0923 per dollar

Cryptocurrencies

• Bitcoin rose 1.2% to $56,732.11

• Ether rose 1.3% to $2,398.96

Bonds

• The yield on 10-year Treasuries was little changed at 3.72%

• Japan’s 10-year yield was unchanged at 0.870%

• Australia’s 10-year yield declined three basis points to 3.90%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.

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