Asian stocks gain following U.S. jobs data

by Jonathan Adams

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3%, Taiwan gained 1%, Chinese blue chips advanced 0.1%

Most Asian stocks gained on Monday, extending the rally that took global equities to a record high after a U.S. jobs report indicated the economic recovery remained intact but didn’t yet warrant any immediate withdrawal of Federal Reserve stimulus.

Japanese markets, however, were down, with the Nikkei dropping 0.5% following a surge in COVID-19 cased in Tokyo.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3%, led by a 1% gain in Taiwan. Chinese blue chips advanced 0.1%.

Trading is set to be thinner than usual with U.S. markets closed for the extended 4th of July weekend, meaning some of those upside moves might be capped and price action might be choppy, according to Kyle Rodda, a market analyst at IG in Melbourne.

But given Friday’s nonfarm payrolls numbers, things are still really, really optimistic, and I think you’ll start to see that come through again as the week unfolds, Rodda said. Conditions are right for equities to continue to push higher right across the globe.

The MSCI All Country World index ended the last week at a record 724.66, and inched up 0.1% on Monday.

S&P 500 futures pointed to a 0.1% drop for Tuesday’s open, after the index ended 0.8% higher at a record 4,352.34 on Friday. The Dow Jones Industrial Average gained 0.4% and the Nasdaq Composite advanced 0.8% to hit a record.

U.S. nonfarm payrolls rose by a bigger-than-expected 850,000 jobs last month. But the unemployment rate unexpectedly rose from 5.8% to 5.9%, while the average hourly earnings increased 0.3% last month, lower than the forecast for a 0.4% rise.

The goldilocks print suggests there is no need to accelerate the tapering timeline or the implied rate hike profile, Tapas Strickland, an analyst at National Australia Bank, wrote in a client note.

Overall the level of payrolls is still 6.8 million below pre-pandemic February 2020 levels and is still below the level of substantial progress needed by the Fed. As such there is nothing in this report for the Fed to become hawkish about, Strickland wrote.

Eyes will be on the minutes of the Federal Open Markets Committee (FOMC) meeting from last month, when policymakers signalled two rate hikes by the end of 2023. Investors will parse Wednesday’s release for further clues on the timing of policy tightening.

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