Asian Markets Mixed as Dollar Fluctuates Ahead of Earnings and Jobs Data

Post by: Raman Preet

Photo : Reuters

Asian stocks experienced mixed results amid volatile trading on Tuesday as investors prepared for a significant week of tech megacap earnings reports from Wall Street, starting with Google parent Alphabet. This anticipation created a cautious atmosphere, as market participants weighed potential implications for the tech sector and broader markets.

The dollar remained steady, not far from a three-month high, as traders awaited the release of the JOLTS job openings report—one of the Federal Reserve's preferred employment indicators—due on Tuesday. This report precedes the highly anticipated monthly non-farm payrolls data set to be released on Friday. Meanwhile, U.S. Treasury yields eased slightly after hitting three-month peaks, indicating a cautious sentiment among investors.

The Japanese yen showed signs of recovery after a steep decline the previous day, which saw it drop to a three-month low. This plunge was attributed to the recent electoral defeat of the coalition government, casting uncertainty on Japan's fiscal and monetary policies. The Nikkei index rebounded, gaining momentum after a cautious start and building on the previous session's gains.

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In the United States, the election race is reaching its climax, with opinion polls indicating a tight contest. Betting markets and financial analysts appear to favor a victory for Republican candidate Donald Trump over Democrat Kamala Harris, which could influence market dynamics.

Crude oil prices saw a slight uptick following a significant decline on Monday, driven by easing fears of an escalation in the ongoing conflict in the Middle East. Israel refrained from targeting oil and nuclear facilities in a recent retaliatory strike against Iran, contributing to a more stable outlook for oil prices.

As of 0213 GMT, the Nikkei index had risen by 0.65%, building on its previous session’s 1.82% gain, despite starting the day with a modest decline of 0.21%. Hong Kong's Hang Seng index also climbed by 0.65%, recovering from earlier gains of as much as 1.6%. However, mainland Chinese blue chips slipped by 0.1%, retracting from an early rise of 0.68%.

U.S. S&P 500 futures remained flat after the cash index had gained 0.26% overnight. Market analysts noted a lack of strong conviction among investors to push markets higher during this uncertain period. Tony Sycamore, a markets analyst at IG, commented, “We’re in a very tricky period here. It just doesn’t make sense to be chasing risk at this time.”

The forthcoming earnings reports from the "Magnificent Seven" group of megacap technology stocks, which have been instrumental in driving Wall Street to record highs this year, are highly anticipated. Alphabet's earnings report is due first, followed by reports from Meta Platforms and Microsoft on Wednesday, and Apple and Amazon on Thursday.

The dollar was little changed against a basket of six major currencies, including the yen and euro. The dollar index stood at 104.24, after hitting 104.57 overnight, which matched the high from the previous week—a level not seen since July 30. Recent robust economic data from the U.S., highlighting a resilient job market, has tempered expectations for any easing measures from the Federal Reserve this year, supporting the dollar's strength.

Furthermore, the U.S. currency has been buoyed by rising market expectations for a potential election victory for Trump. His policies on tariffs, taxes, and immigration are perceived as inflationary, which could negatively impact bonds but positively influence the dollar.

Ten-year U.S. Treasury yields eased to 4.272% on Tuesday after reaching a peak of 4.3% overnight, marking the highest level since July 11. The dollar dipped 0.24% to 152.92 yen, following a rally that saw it rise to 153.885 yen on Monday, a level not seen since July 31.

In Japan, the political landscape is uncertain as Prime Minister Shigeru Ishiba's Liberal Democratic Party, along with its junior partner Komeito, lost its majority in parliament. This outcome suggests potential increases in fiscal spending and complicates the Bank of Japan's efforts to normalize interest rates. The head of the opposition Democratic Party for the People advised that the central bank should refrain from making significant changes to its ultra-loose monetary policy due to stagnant real wage growth.

The Bank of Japan is set to make a policy decision on Thursday, with no significant changes anticipated. The euro held steady at $1.0814, and the British pound was flat at $1.2973. Gold prices rose by 0.35% to $2,751.76 an ounce, approaching the record high of $2,758.37 achieved last week.

Crude oil futures gained 0.6% to $71.86 per barrel, while U.S. West Texas Intermediate crude rose by 0.7% to $67.83 per barrel. Both contracts had experienced a sharp decline of 6% on Monday, reaching their lowest levels since October 1.

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