Hong Kong: Asian stocks rose ahead of the latest US payrolls report on Friday, expected to show the fewest job losses since August 2008, while oil prices recovered after a sharp drop on high US fuel inventories.
The Australian dollar edged further above $0.91 after the Reserve Bank of Australia sharply upgraded growth forecasts and said more gradual increases in interest rates will be required.
That contrasted with the Federal Reserve this week, which said rates will stay near zero for a long time, and the Bank of England on Thursday, which extended its emergency supply of funds.
Financial markets this week have been on a rollercoaster of volatility, though tensions have eased ahead of the US October employment report. After jumping well above 30 on Monday, the VIX index, a measure of risk based on S&P 500 index options, has tumbled for four days.
“I think the market is likely to rise both if the (US employment) numbers come in as forecast as well as if there’s a positive surprise,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo.
“Even though the unemployment rate is likely to hit 10%, this will not badly affect things since it’s unavoidable. Employment can’t recover that fast.”
Japan’s Nikkei share average rose 1.1%, led by technology and retail stocks. Shares of NEC Corp jumped 8.9% after Japan’s largest PC maker said it would raise ¥133.9 billion ($1.5 billion) in a stock sale.
The MSCI index of Asia Pacific stocks outside Japan advanced 1.5%, with gains spread evenly across the materials, industrials, IT and financials.
The earnings outlook is dominated by the consumer discretionary and IT industries. Consumer discretionary stocks are expected to record earnings growth of 58.9% over the next 12 months, mostly driven by automakers, Thomson Reuters Proprietary Research shows.
IT is expected to achieve equally bullish earnings growth of 50.9% in the next 12 months.
The US economy likely shed 175,000 jobs in October, according to a Reuters poll, the 22nd month of job losses, and unemployment is forecast to tick up to 9.9%. However, the pace of labour market contraction has been slowing.
In currency markets, the Australian dollar rose 0.1% to $0.9113, making steady progress back up to its October high above $0.93. Its near-term direction may depend on the chances of a December interest rate hike.
The swap market reflects a slightly better than 50/50 chance of a quarter percentage point increase.
The US dollar was steady against major currencies ahead of the payrolls number, but losing ground against emerging Asian currencies.
“No doubt a strong jobs number could give the high-yielders a lift,” said Amber Rabinov, market economist at ANZ. “Having said that we don’t think there is much room for them to rally as participants are very long on pro-cyclical currencies like the Aussie and the Kiwi.”
US crude for December delivery rose 0.4% to $79.96 a barrel. Oil has spent the last month dancing around $80 a barrel, in a range of $82 to $76.