Stocks climb ahead of US jobs data

  • Asian shares set for third straight week of gains
  • Taiwan leads Asian gains; US European share futures up
  • The Treasury yield curve remains sharply inverted
  • Oil edges off near six month lows

HONG KONG, Aug 5 (Reuters) – Asian shares gained on Friday ahead of US jobs data that will give another clue to the health of the world’s largest economy as warning signs flashed in bond markets, and oil traded around its lowest level since the start of the war in Ukraine.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.74%, boosted by index heavyweight TSMC (2330.TW), which jumped 3.2%, regaining ground it had lost earlier in the week due to tensions surrounding the US House of Representatives Speaker Nancy Pelosi’s visit to Taiwan.

This left the regional index set to finish a third straight week in positive territory, while Japan’s Nikkei (.N225) gained 0.83%.

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EUROSTOXX 50 futures and S&P 500 futures both gained 0.2%.

But the day’s main event, US employment data, is yet to come, with investors waiting to see whether the US Federal Reserve’s aggressive pace of rate hikes is starting to cause economic growth to slow.

Nonfarm payrolls are expected to increase by 250,000 jobs last month, after rising by 372,000 jobs in June.

Last week, shares and US treasuries rose as markets decided the Fed might raise rates less aggressively due to fears about a recession and hopes of slowing inflation, although many Fed policy makers have pushed back on such suggestions this week.

“We’re waiting to see a slowdown in the labor market, so if we get a large miss, it will finally confirm the labor market is slowing, and we’ll see some more rallies in US treasuries,” said Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management.

Other asset classes are already reflecting a slowdown.

“The bond market is saying there is a pretty high chance of recession, while the equity market is focused on the labor data, said Bhayani.

The closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes reached 39.2 basis points overnight, the deepest inversion since 2000.

An inverted curve is often viewed as portending a recession.

On Friday morning, the 10-year yield was 2.6936% and the two-year yield was 3.0531%, leaving the gap between them at a still large 36 basis points.

In another sign that growth could be slowing, oil closed overnight at its lowest levels since February, before the war in Ukraine.

“Crude oil fell sharply as recessionary fears drove concerns of weaker demand,” said analysts at ANZ, with declines also partly due to data on Wednesday showing surge in US inventories last week. read more

Prices recovered a touch in Asia trade on Friday, Benchmark Brent crude futures were up 0.5% $94.61 a barrel and US crude futures were 0.7% higher at $89.12 a barrel.

In currency markets the dollar index, which measures the greenback against six major peers, was at 105.93, up a fraction having fallen 0.6% overnight alongside falling US yields.

Sterling was down a whisker against the dollar at $1.2142 after taking a spin overnight as the Bank of England raised interest rates and warned a long recession was approaching Britain. read more

Spot gold was steady at $1,790 an ounce.

(This story corrects headline to remove extraneous words)

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Editing by Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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