May 6, 2016 – Financial Times – Stocks in Japan dropped and the yen strengthened as trading resumed after a three-day break, while caution dominated in other Asian markets ahead of key US jobs data.
Japanese markets have been closed since Tuesday for a public holiday. Over that period, the yen weakened 0.8 per cent against the dollar, but that move went into reverse on Friday.
The yen firmed 0.2 per cent to ¥107.06 per greenback on Friday while the dollar index, a measure of the US currency against a basket of global peers, trimmed initial gains to be flat at 93.751.
Japan’s broad Topix index was down 0.6 per cent while the Nikkei 225 was off 0.8 per cent. That put both equities gauges on track for a sixth straight session of declines over a holiday-interrupted fortnight, which would be their longest losing streak since a six-day slide at the start of the year amid a global sell-off.
Also weighing on sentiment was a Nikkei-Markit survey showing Japan’s services sector contracted in April for the first time since March last year.
“Nonetheless, service providers were more optimistic towards growth over the next 12 months, with business sentiment picking up to the highest in eight months. Companies linked confidence to forecasts of company expansions, greater demand and efficiency improvements,” said Amy Brownbill, economist at Markit.
Hong Kong’s Hang Seng was down 1.3 per cent, while China’s Shanghai Composite was down 1.9 per cent and the technology-focused Shenzhen Composite fell 2.3 per cent.
Movement on Wall Street was subdued ahead of April non-farm payrolls due later in the global day. The S&P 500 was flat, while the Nasdaq Composite was down 0.2 per cent. Data on Wednesday showed that the private sector added fewer jobs in April than expected, which has made some investors a wary of what might show up in Friday’s job market report.
Economists expect the US economy to have added 200,000 jobs, a drop of 15,000 from March, and project the unemployment rate to fall one-tenth of a percentage point to 4.9 per cent.
Gold, which is typically sensitive to US interest rate expectations, firmed 0.1 per cent in Asia to $1,279 an ounce. The yellow metal briefly surpassed $1,300 an ounce on Monday for the first time since January 2015 while the dollar hit an 18-month low against the yen, before both reversed course.
“The US dollar needs tonight’s US monthly jobs report to hold up to extend its recovery,” said analysts at DBS.
“At the last FOMC meeting on 27 April, the Fed dialled down the global headwinds to the US economy but made clear that it remains data-dependent. Recent comments by Fed officials affirmed that a rate hike… on 15 June remains a possibility, subject to the progress in jobs and inflation,” DBS continued.
The Australian dollar took a hit, sliding 1 per cent to US$0.7390 after the Reserve Bank of Australia cut its inflation forecast for this year to between 1 and 2 per cent, from 2 per cent previously.
The currency was already on the back foot, having tumbled on Tuesday by the most since 2011 after the RBA responded to weak March quarter inflation data and cut interest rates to a record-low 1.75 per cent.
The S&P/ASX 200 was down 0.5 per cent, while the yield — which moves inversely to price — on the benchmark Australian government 10-year bond fell as much as 11.4 basis points to 2.277 per cent. That leaves it just 3 bps away from a record intraday low stuck in February 2015.
Oil prices turned lower in Asia, with Brent crude, the international benchmark, down 0.6 per cent at $44.74 a barrel and West Texas Intermediate, the US marker, down as much to $44.06.