Asian shares hit 2-month high after solid US job growth

Reuters: Asian shares hit two-month highs on Monday, extending sharp gains from last week, following upbeat US jobs data and a rebound in oil and commodity prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%. It now recouped about 80% of its losses since the start of 2016.

Japan’s Nikkei slipped 0.4%, with traders taking profits on concerns about a firmer yen and ahead of revised fourth-quarter GDP on Tuesday which is expected to show the economy contracted slightly more than initially estimated.

Chinese markets edged up slightly after Prime Minister Li Keqiang on Saturday spelled out a new five-year economic plan, which included an average economic growth target of 6.5-7% and a moderate increase in the fiscal deficit to 3% of GDP this year.

“Chinese investors weren’t expecting big fiscal stimulus at all so there’s no disappointment there. Talk of fiscal stimulus mainly came from foreigner investors,” said Naoki Tashiro, president of TS China Research.

The Shanghai Composite index rose 0.5%. The index of China’s start-up market rose 4% after Prime Minister Li did not mention IPO liberalisation in his speech, Tashiro added.

MSCI’s broadest gauge of the world’s stock markets also hit a two-month high on Friday, posting its largest weekly gain since October.

US nonfarm payrolls grew by 242,000 jobs last month, beating forecasts for 190,000 new jobs, while the participation rate rose for three months in a row. The upbeat figures, coming after data last week showing some signs of recovery in the US manufacturing sector, eased worries that the US economy could be slipping into recession under the weight of low oil prices and a stronger dollar. “The US job data helped to push back excessive pessimism on the US economy. A brightening US economic outlook is underpinning various risk assets,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

On the other hand, average US hourly wages unexpectedly dipped by 0.1% after a surprisingly strong 0.5% increase in January. That suggested the Federal Reserve can afford to wait longer before raising interest rates again.

As a result, US interest rate futures are now pricing in only one rate hike by the end of year, with virtually no chance seen of a rate hike in March. 

The US 10-year bond yield rose to a one-month high of 1.902% on Friday but remained way below its levels of around 2.25% in December when the Fed raised rates for the first time in almost a decade.

That limited the dollar’s attraction against other currencies. The dollar’s index against a basket of six major currencies dipped to near two-week low of 97.019 on Friday and last stood at 97.349.

The euro rose to one-week high of $1.1043 on Friday and last stood at $1.0992.

The common currency has been pressured by anticipation that the European Central Bank will expand its stimulus at a policy meeting on Thursday.

The yen was little changed at 113.88 to the dollar.

The commodity-linked Australian dollar shot up to a 5 1/2-month high of $0.7444 on Friday and last stood at $0.7414.