SYDNEY: Asian shares were subdued on Friday as investors hunkered down for the all-important payrolls report, while Tesla suffered huge losses on the very public feud between President Donald Trump and billionaire Elon Musk.
A run of soft economic data this week has markets wary of a downside surprise in the monthly payrolls print due later in the day, which would add to fears of stagflation while piling pressure on the Federal Reserve to ease policy in a hurry.
Tesla shares bounced 0.8% in after-hours trading after tumbling a whopping 14% overnight to wipe off $150 billion in market value. That came after Trump threatened to cut off government contracts to Elon Musk’s companies as the once close relationship turned into a bitter public feud.
Nasdaq futures were flat and S&P 500 futures inched up 0.1%.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.1% on Friday but it is still set for a weekly rise of 2.2% to hover just below an eight-month peak.
Japan’s Nikkei rose 0.3% but is set for a weekly drop of 0.7%.
South Korea’s KOSP is closed for a holiday but was up 4.2% this week to nearly 11-month tops as the newly elected President Lee Jae-myung planned an emergency package to boost the flagging economy. The won has also gained 2% this week to an eight-month peak.
Chinese blue chips were flat and Hong Kong’s Hang Seng dropped 0.3% as a call between Trump and Chinese President Xi Jinping offered little clarity to ease ongoing trade tensions.
“The U.S.-China agreement to de-escalate tensions, and the recent phone call between Trump and Xi, shows both countries have an economic ‘pain threshold’,” said Luke Yeaman, chief economist at the Commonwealth Bank of Australia.
“This takes some severe downside scenarios off the table, but tensions will remain high and further bouts of escalation are likely…we see little prospect that a comprehensive US-China trade agreement will be settled by 14 August.”
Weaker-than-expected labour market data, including a 47% year-on-year jump in Challenger layoffs and a significant downside surprise in ADP’s private payrolls, have dampened expectations for the payrolls report.
Forecasts are centred on a rise of 130,000 jobs in May, with the unemployment rate holding steady at 4.2%.
Any unexpected weakness could bring the next U.S. rate cut forward and trigger a huge rally in Treasuries. Futures imply scant chances of a rate cut until September, which is about 93% priced in, with another move likely to come in December.
Yields on the benchmark ten-year Treasuries were flat at 4.3925%, having risen 3 basis points overnight to bounce away from a one-month low.
“We expect payrolls to lose additional momentum in May, printing a below-consensus 110,000,” said analysts at TD Securities in a note to clients.
“Markets have recently been singularly focused on tariffs and deficits, with macro taking a back seat in recent weeks. Our forecast may not be sufficient to catalyze this revamped focus on macro, but we expect downside surprises to generate a larger market reaction.”
Asian shares creep higher, dollar languishes before ECB
The dollar was flat against its major peers on Friday but was set for a weekly drop of 0.7% on soft economic data.
The euro got some support and hit a six-week top of $1.1495 overnight after the European Central Bank cut rates but signaled that it was nearing the end of its year-long policy easing cycle. Investors have given up on a move in July, with the final move mostly to come in December.
In commodities markets, oil prices were slightly lower but were headed for weekly gains on supply concerns. U.S. crude futures slipped 0.1% to $65.29 a barrel but was up 2.1% for the week.
In precious metals, gold prices climbed 0.3% to $3,362 an ounce. For the week, they are up 2.2%.
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