Asian bonds rise with treasuries on US labor market cooling

June 05, 2024 (MLN): Asian bonds tracked Treasuries higher as signs of a cooling US labor market buoyed Federal Reserve rate-cut bets, as Bloomberg reported.

Stocks lacked direction.

Australian and Japanese notes rose after US data showed job openings hit the lowest since 2021.

That lifted Treasuries on Tuesday — sending the 10-year yield down six basis points — and reinforced speculation that the Fed will be able to lower rates this year. US yields climbed in Asia.

Japanese equities slumped more than 1%. Benchmarks jumped in Hong Kong and South Korea, supported by rates-sensitive tech shares.

Mainland Chinese shares fell despite data showing an expansion in the services sector.

Indian markets saw a volatile open as investors assessed Prime Minister Narendra Modi-led party’s ability to form a coalition government after failing to secure a majority on its own.

Equities fluctuated, while the rupee climbed against the dollar after sliding to near a record low in the previous session.

“Asian markets remain in the ‘direction-seeking’ mode today but with no shortage of spotlight markets,” said Hebe Chen, market analyst at IG Markets Ltd. “The ripple effect of political noise in India throughout the financial world will be closely monitored in the stock market.”

A Bloomberg gauge of dollar strength was little changed after eking out gains in the past two sessions.

The yen pulled back against the greenback after Japan’s April wage data raised questions about the strength of gains in pay.

Markets are shifting focus to a slew of labor-market readings this week, including Friday’s US jobs report, for further clues on when the Fed will deploy rate cuts.

US stock futures traded with modest gains in Asia.

To Bill Adams at Comerica Bank, the risk of wage-price pressures fueling inflation is falling, which has the Fed breathing easier than a few years ago.

That’s probably why Chair Jerome Powell took it in stride when inflation accelerated earlier this year, saying hikes were unlikely, he said.

“The evidence is accumulating that the Fed should begin easing,” said Ronald Temple, chief market strategist at Lazard.

In commodities, oil was steady after falling on Tuesday following an industry report that pointed to an increase in US crude stockpiles. Bitcoin topped $70,000.

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