Asian stocks were fluctuating on Thursday as Wall Street resumed gains after weaker-than-expected jobs data and minutes from last month's Federal Reserve meeting showed some officials were open to cutting interest rates.
The reading added to optimism that the central bank would start to unwind a long period of tight monetary policy, and analysts said the main debate was how big the latest round of measures would be and how many more would follow.
The comments also came just days before Fed Chairman Jerome Powell is scheduled to deliver a highly anticipated speech to an annual symposium of central bankers in Jackson Hole, Wyoming, where he is expected to hint at a rate cut.
The latest purchases came after Labor Department figures showed U.S. employers added about 68,000 fewer jobs each month in the year to March than initially expected.
The figures underscore the fact that the labor market is softening while inflation is falling, enough to prompt policymakers to start cutting borrowing costs.
Meanwhile, minutes from the Fed's July policy meeting showed that most members thought it would be “appropriate” to cut interest rates in September, but some members said they “had reasonable grounds to lower the target range by 25 basis points at this meeting or could support such a decision.”
Observers say the minutes make a rate cut almost certain, with the debate currently focused on whether to cut rates by 25 or 50 basis points.
Investors are pricing in a rate cut of more than 1 percentage point by the end of the year, according to Bloomberg News.
However, Ray Attrill of National Australia Bank said the release of the employment data before the Fed meeting had led to a market-wide sell-off and raised fears of a recession, as it came in well below expectations.
He said that would “certainly intensify those sentiments against cuts.”
“Whether there's a chance of a 50 basis point cut instead of a 25 basis point cut at the (September) meeting will depend on the August nonfarm payrolls report, due on Sept. 5, and any inflation data released between now and the meeting,” he added.
“The former would need to at least mimic (or exceed) July's weakness, while the latter would provide great comfort to the Fed in going ahead with a 50 basis point rate cut.”
And independent analyst Stephen Innes warned the revised jobs data was a “worst case scenario” and should serve as a “wake-up call”.
“Economic resilience remains important. If the economy stabilizes, the stock market may continue to rise,” he said.
“But the problem is that when the next jobs report is released, everything from the size of the Fed's rate cuts to the true strength of the U.S. economy could all come crashing down in a classic 'hopefully be cautious' scenario.”
All three major Wall Street indexes rose, with the S&P 500 just edging closer to an all-time high, while Asian markets fluctuated in and out of positive territory.
Tokyo, Hong Kong, Sydney and Manila rose, while Shanghai, Singapore, Seoul, Wellington and Taipei fell.
In currency markets, the dollar remains under pressure from expected interest rate cuts, but investors are also focusing on Bank of Japan Governor Kazuo Ueda's questions to lawmakers after his rate hikes and hawkish rhetoric this month sparked panic across markets.
– Key figures around 0230 GMT –
Tokyo – Nikkei Stock Average: up 0.6% to 38,190.85 (break)
Hong Kong – Hang Seng Index: up 0.2% to 17,425.61
Shanghai Composite Index: down 0.2% to 2,850.44
Dollar/yen: Up to 145.45 yen from Wednesday's 145.22 yen
EUR/USD: down from 1.1151 to 1.1143
Pound/dollar: down from $1.3087 to $1.3084
EUR/GBP: down from 85.18p to 85.16p
West Texas Intermediate: down 0.4% to $71.63 a barrel.
Brent crude: down 0.3% to $75.83 a barrel
New York – Dow Jones Industrial Average: up 0.1% to 40,890.49 (closing price)
London – FTSE 100: up 0.1% to 8,283.43 (close)
Dan/CWL
