— Asian stock markets stayed within tight ranges on Friday amid thin holiday trade and as investors awaited the release of key U.S. jobs data and other directional cues.
Hong Kong stocks climbed 0.4 percent, the Australian market gained 0.1 percent, while Korea’s KOSPI slipped 0.5 percent and New Zealand shares eased 0.3 percent. China and Japan remained closed for holidays and will re-open on Monday and Tuesday, respectively.
European stocks are set to open higher, with London’s FTSE futures up 0.2 percent and German DAX futures up 0.1 percent. Overnight on Wall Street, major indices… gave up initial gains and closed in the red, weighed down by energy shares.
Oil prices plunged after U.S. crude production output set a new record, though the losses were capped by the intensifying political crisis in Venezuela and the stopping of Iranian oil sanction waivers by Washington. U.S. crude was down 0.3 percent at $61.65 a barrel while Brent slipped 0.5 percent to $70.42.
Investors await U.S. employment figures due later in the day, which is forecast to show 185,000 net new jobs were added in April and the unemployment rate steady at 3.8 percent. A report by a payrolls processor on Wednesday showed U.S. private employers added 275,000 jobs last month.
A solid official reading would bolster the notion the world’s biggest economy is on track for its longest expansion ever, further boosting the greenback and prospects for corporate earnings.
“There’ll be more than one eye on what the report says about average earnings growth that’s expected to grow a meager 0.1 percent,” said National Australia Bank economist David de Garis. Global policymakers are grappling with tepid wage growth and lukewarm inflation despite a surge in jobs and still strong economic expansion, complicating monetary policy decision-making.
World stocks have rallied hard this year – the S&P 500 has climbed more than 16 percent so far in 2019 – but further gains will be hard to come by, analysts at Capital Economics said.
They forecast the S&P 500 would drop to 2,300 points by Christmas from current levels of just under 2,900, with GDP growth in advanced economies slowing to 1 percent in 2020, down from 2.2 percent in 2018. “Investors are still too optimistic about the outlook for earnings growth. As earnings disappoint, we think that stock markets will drop around the world.”
At the same time, investors are “not willing to be too skeptical because there might be a (U.S.-China) trade agreement on the way,” said Ben Kwong, head of research at KGI Asia. The two sides are reportedly near a deal after talks in Beijing this week.
PRESSURE DOWN UNDER… In the currency markets, Australian and New Zealand dollars fell in early trade as speculators wagered both countries could see interest cuts next week.
The Aussie slipped below psychological support of $0.7000 overnight to the lowest since early January while the kiwi dollar drifted closer to a recent five-month trough of $0.6581. The weakness in the antipodean currencies also came as the U.S. dollar gained on remarks by U.S. Federal Reserve Chair Jerome Powell earlier this week that a recent weakness in inflation owed to “transitory” factors.
That led traders to start paring expectations for a Fed rate cut. Futures now imply about a 49 percent probability of an easing at year-end, down from 61 percent late on Wednesday, according to CME Group’s FedWatch program.
The dollar index held at 97.842, inching toward a two-year peak of 98.33 touched last week. Against the Japanese yen, the dollar was little changed at 111.48 having spent the entire week in a tight 111.03-111.89 range. Spot gold was 0.2 percent higher at $1,271.43 an ounce.