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Markets Update am


  • Asian shares slipped for a seventh straight session
  • European and US equity gauges are firmer,
  • rallying off three-week lows
  • oil prices jump.
  • Trading is cautious, with mild moves in major currencies and a steady fixed-income sector.

Volumes are thinned by a number of financial centres shut for holidays — including those of Japan, Indonesia, South Korea, Switzerland, and the Nordic nations — and uncertainty ahead of key US jobs data on Friday.

Asian shares slipped for a seventh straight session on Thursday as mixed economic data did nothing to assuage concerns about global growth, keeping sovereign bonds well supported as a hedge against deflation risks.

The latest survey from China showed the service sector expanded at a slower pace in April, though firms did resume adding staff.

The Caixin/Markit services purchasing managers‘ index (PMI) dropped to 51.8, from 52.2 in March, but at least stayed in growth territory. Hong Kong’s version of the PMI slid deeper into contractionary territory to touch an eight-month low.

In US, The Wall Street benchmark, which tends to set the tone for most bourses, fell on Wednesday to its lowest level since April 12, amid a lacklustre corporate earnings season and after some mixed data left investors unsure about the health of the global economy and prospects for US monetary policy.

In particular, a relatively soft ADP report on private sector employment — just 156,000 positions were created in April — is seen boding ill for the official monthly US labour data due at the end of the week.

“We continue to expect growth in US non-farm payrolls [NFP] to slow down,” said Strategas Research, adding that this would be consistent with moderating activity seen in the country’s service sector.

If the NFP report does come in shy of current Reuters consensus forecasts of 202,000 then traders are likely to lengthen further the odds on the Federal Reserve increasing borrowing costs this year.

Futures markets are pricing in just a 10 per cent chance of the Fed hiking by 25 basis points at the June meeting and only 52 per cent for an increase in December.

Short-term government debt reflects this expected flatter monetary tightening trajectory. The 2-year US yield, which moves inversely to the bond price, was above 1 per cent in March and is now 0.75 per cent.

Ten-year Treasuries are 1.79 per cent, up one basis point on the day, while equivalent maturity German Bunds are adding 1bp to 0.22 per cent.

The dollar index, which measures the buck against a basket of its peers, is barely changed at 93.04, having dropped to an intraday 15-month low of 91.92 on Tuesday.

  • The euro is up just 2 pips to $1.1487,
  • the yen is 7 pips softer at ¥107.07 and
  • sterling is 0.1 per cent firmer at $1.4516.

However the Aussie dollar, which on Tuesday fell 2.4 per cent after the Reserve Bank of Australia cut interest rates to a record low 1.75 per cent, is up 0.6 per cent to US$0.7501.

The Philippine peso fell to a two-month low as the May 9 presidential election draws closer. The currency has been weakening for three weeks as the mayor of Davao City, Rodrigo Duterte, rises in opinion polls. Duterte ranked third in a Bloomberg survey last month that asked analysts who was the best candidate to run the economy.

The Turkish lira is recovering 1.1 per cent to Tl2.9262 after plunging 5.7 per cent in just the previous two sessions amid a political palaver in Ankara. But Turkish stocks remain under the cosh, shedding another 2 per cent to hit a near two-month trough.

In commodities, Brent crude, the international oil benchmark, is on track for its first gain in five sessions, up 1.7 per cent at $45.36 a barrel on worries a Canadian wildfire may crimp production. Base metals are generally a bit softer as global demand concerns linger.

Gold is down $1 to $1,278 an ounce.


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