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Asia shares mixed, mull implications of US jobs shock
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Global indices are displayed on a screen on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 19, 2021. (REUTERS/Andrew Kelly)
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sian shares got off to a mixed start on Monday as a disappointing United States (US) payrolls report promised to keep policy there super-loose for longer, but also clouded the outlook for global growth and inflation.
A holiday in the US made for thin conditions and kept MSCI's broadest index of Asia-Pacific shares outside Japan flat in early trade.
Japan's Nikkei added 1.7 percent, but South Korea eased 0.1 percent. Nasdaq futures were barely changed, while S&P 500 futures dipped 0.1 percent.
Investors were still assessing the fallout from the September payrolls report which showed a much smaller increase in jobs than expected, but also a pick up in wages.
The latter was enough to nudge longer-dated US Treasury yields higher and steepen the yield curve, even as markets speculated the Federal Reserve might start tapering later.
"Employment decelerated sharply in August, with little indication of a pickup in labour supply," said Barclays economist Jonathan Millar. "This puts the Fed in a quandary as it balances risks of a sharp demand slowdown against those of tight supply and inflation."
"We still expect the Fed to signal tapering in September, but now expect it to begin in December, not November. QE (quantitative easing) will likely end by the middle of 2022."
The rise in US 10-year yields to 1.32 percent limited some of the pressure on the dollar from the poor payrolls print, though its index still touched a one-month low before steadying at 92.128.
The dollar remained sidelined on the yen at 109.76, while the euro was firm at US$1.1881 after hitting a five-week top of $1.1908 on Friday.
The European Central Bank (ECB) holds its policy meeting this week and a number of policy hawks have been calling for a step back in their huge asset buying programme, though President Christine Lagarde has sounded more dovish.
Read also: Asian stocks hold gains on easing Fed taper worries as Powell speech awaited
"We expect the ECB to announce a reduced pace of Q4 PEPP (pandemic emergency purchase programme) at its September meeting on the back of easier financial conditions," said analysts at TD Securities.
"All other policy levers are likely to be left on hold, with inflation forecasts revised sharply up this year and next. Communication risks are high, and Lagarde will want to avoid sounding overly hawkish, instead emphasising 'persistence'."
The prospect of a later start to Fed tapering was positive for non-yielding gold, which stood at $1,826 an ounce, having reached its highest since mid-June at $1,833.80.
Oil investors were more concerned the poor pace of U.S. hiring would be a drag on demand and prices slipped.
Brent fell 65 cents to $71.95 a barrel, while US crude lost 59 cents to $68.70.
