Asia Stocks Eye Cautious Start; Dollar Strengthens: Markets Wrap

Asia Stocks Eye Cautious Start; Dollar Strengthens: Markets Wrap
Sunil Jagtiani
·3 min read

(Bloomberg) -- Asian stocks looked set for a steady start Thursday amid a firmer dollar as traders weigh concerns about the more contagious delta strain of Covid-19 and look ahead to a U.S. payrolls report.

Equity futures were little changed in Japan and Australia. Hong Kong is shut for a holiday. While the S&P 500 edged up overnight, rounding out one of the best first halves since 1998 for U.S. stocks, the recent spread of the virus variant is tempering some of the optimism around the global recovery. S&P 500 and Nasdaq 100 contracts were slightly higher in early trading.

The dollar held an advance after completing its best month since March 2020 and Treasuries were steady. U.S. data showed surprise strength in pending home sales and an ongoing labor market recovery. The payrolls report due Friday will provide a key gauge of economic progress, helping to shape expectations of when the Federal Reserve might start tapering stimulus.

Elsewhere, oil climbed ahead of a meeting between OPEC+ producers on output policy and as a stalemate in Iranian nuclear talks drags on.

Markets start the second half facing challenges from Covid-19 variants and the prospect of diminishing monetary policy support amid inflation pressures. That’s leading to predictions of a pickup in volatility and stirring questions about whether bets tied to economic reopening -- such as on cyclical stocks and higher longer-term Treasury yields -- will prosper.

“While we expect stock markets will ultimately thrive in the reflationary environment of strong, above-trend growth and ample liquidity conditions, it won’t be a smooth ride,” said Candice Bangsund, vice president and portfolio manager at Montreal-based Fiera Capital Corp. “The next phase of the bull market may exhibit more frequent bouts of volatility.”

In the latest commentary from Federal Reserve officials, Dallas Fed President Robert Kaplan said the tapering of asset purchases -- which he hopes will start “soon” -- should run more smoothly this time around as investors already know that a move is being discussed.

His Atlanta counterpart Raphael Bostic noted the U.S. has “actually fully recovered” from the pandemic on a gross domestic product basis, but “it is going to take some time to get back” on employment.

Here are some events to watch in the markets this week:

China’s President Xi Jinping will deliver a speech as the nation marks the 100th anniversary of the founding of the Chinese Communist Party ThursdayOPEC+ ministerial meeting ThursdayECB President Christine Lagarde speaks FridayThe U.S. jobs report is due Friday

These are some of the main moves in markets:

Stocks

S&P 500 futures added 0.1% as of 7:50 a.m. in Tokyo. The index rose 0.1%Nasdaq 100 futures rose 0.1%. The gauge fell 0.1%Nikkei 225 futures were little changedS&P/ASX 200 futures were steady

Currencies

The Bloomberg Dollar Spot Index was steady after rising 0.3%The euro was at $1.1856The Japanese yen was at 111.11 per dollar after sliding 0.5%The offshore yuan was at 6.4680 per dollar

Bonds

The yield on 10-year Treasuries was little changed at 1.47%

Commodities

West Texas Intermediate crude rose 0.2% to $73.59 a barrelGold was at $1,769.34 an ounce

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