Asian markets are poised for a muted opening after a turbulent but slightly recovering Wall Street session. The unease persists in the absence of major news ahead of the anticipated US employment report later today. With the Chinese markets shuttered, attention shifts to the continued slowing drop in oil prices, influenced by higher stockpiles and technical indicators, especially following an OPEC+ meeting that yielded no policy changes. The energy sector in Asia could face some tailwinds on the back of that. The energy price action has played a role in the recent dip in US Treasury yields. The Dollar faced selling pressures, while activity currencies found strength, especially towards the end of the trading session, as risk sentiment improved.
Market discussions are dominated by the “US higher rates for longer” narrative, sparking talks of a possible soft landing for the economy. The bond market, however, grapples with significant sell-offs. Some analysts believe stabilizing the bond market might require further adjustment in pricing low-risk assets. As we approach the earnings season, risk assets could hold steady. Today’s highlight is the US Nonfarm Payroll data. Expectations are for a 170k increase in jobs, a dip in the unemployment rate to 3.7%, and a 0.3% month-on-month wage growth.
Speculation is rife about the upcoming Federal Funds Rate decision, with the consensus currently suggesting no change in November. The likelihood of a rate hike is estimated at 22%, but this could change based on the employment numbers. A significant overperformance might introduce more volatility, with the possibility of the long end of the yield curve breaching 5%, which could put risk assets under pressure. Conversely, a substantial underperformance might provide some respite for risk assets. Regardless of the outcome, the focus will soon shift to next week’s US CPI figures.
