Asian Shares Trade In Narrow Range On Tariff Angst: Markets Wrap
On Thursday, the US jobs growth exceeded expectations and all but erased bets for a July rate cut.
Asian shares traded in a tight range Friday as renewed trade tensions ahead of next week’s deadline for higher levies outweighed a record-extending rally in US stocks.
The MSCI Asia-Pacific Index swung between minor gains and losses. Trump said his administration may begin sending out letters to trading partners as soon as Friday, setting unilateral tariff rates, ahead of the July 9 deadline for negotiations. The dollar edged marginally lower. There’s no cash trading in Treasuries due to a holiday in the US.
Investors are paying close attention to how US’s negotiations with trading partners will pan out amid the current pause on Trump’s April tariffs, which he put on hold for 90 days to allow time for talks. Still, stock markets have rallied in recent months to record highs as concerns that the levies will push the US into a recession have eased. On Thursday, the US jobs growth exceeded expectations and all but erased bets for a July rate cut.
“There is still uncertainty out there, but one thing we do know is the US economy seems to be holding up relatively well,” said Tony Sycamore, market analyst at IG Australia.
Trump has long threatened that if countries fail to reach deals with the US before next week’s deadline, he would simply impose rates on them, raising the stakes for trading partners who have rushed to secure agreements with his administration.
“We’re probably going to be sending some letters out, starting probably tomorrow, maybe 10 a day to various countries saying what they’re going to pay to do business with the US,” Trump said.
Treasuries fell and the dollar rose Thursday in a sign traders see less pressure on the Federal Reserve to cut interest rates after US jobs in June. Swap traders saw almost no chance of a July Fed cut, compared with a roughly 25% probability seen before the data. The chance of a move in September ebbed to about 70%.
“The solid June jobs report confirms that the labor market remains resolute and slams the door shut on a July rate cut,” said Jeff Schulze at ClearBridge Investments.
Meanwhile, Trump secured a sweeping shift in US domestic policy as the House passed a $3.4 trillion fiscal package that cuts taxes, curtails spending on safety-net programs. The 218-214 vote in the House Thursday sends the legislation to Trump, in time for a July 4 deadline he set.
The president said he plans to sign the bill on Friday at a 4 p.m. ceremony at the White House.
A $5 trillion increase in the US debt limit in the package eliminates the risk of a market-rattling payment default the Treasury had forecast could come as soon as mid-August without congressional action.
“The removal of the risk that the Treasury Department would exhaust the capacity to fund itself is a highly welcome development for all market players,” Chris Weston, head of research at Pepperstone Group, wrote in a note. “The Treasury department will soon look to ramp up bill issuance.”
In Asia, Hong Kong’s de-facto central bank bought the city’s currency again to defend its foreign-exchange peg. The Hong Kong dollar has had a wild ride recently with two previous rounds of intervention failing to send funding costs high enough to dampen bearish currency bets.
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 9:59 a.m. Tokyo time
Japan’s Topix rose 0.2%
Australia’s S&P/ASX 200 rose 0.2%
Euro Stoxx 50 futures fell 0.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.1766
The Japanese yen rose 0.2% to 144.63 per dollar
The offshore yuan was little changed at 7.1692 per dollar
Cryptocurrencies
Bitcoin fell 0.4% to $109,525.89
Ether fell 0.4% to $2,590.25
Bonds
Japan’s 10-year yield advanced one basis point to 1.450%
Australia’s 10-year yield advanced three basis points to 4.21%
Commodities
West Texas Intermediate crude rose 0.1% to $67.10 a barrel
Spot gold was little changed
