Global Markets Asian shares on defensive ahead of US jobs test

by **hlk** Fri 06 Dec 2013, 08:37

Business & Markets 2013
Written by Reuters
Friday, 06 December 2013 08:17
A + A - Reset
SYDNEY (Dec 6): Asian markets were heading into another trying session on
Friday as speculation builds about an imminent scaling back in U.S. stimulus,
with payrolls data looming as make or break for a move this month.
Adding to the pain for Japanese stocks was a reversal in the dollar against the
yen, and a negative for exporters. The Nikkei has shed 3.6 percent in the last
two sessions and with futures trading at a discount a further drop was expected
at the opening on Friday.
Given the index is still up 46 percent on the year so far, there would seem to be
plenty of scope yet for profit-taking.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat after
slipping 1.5 percent on Thursday.
The lead from Wall Street was again less than helpful with the Dow Jones and
the S&P 500 both ending down 0.43 percent.
That marked a fifth straight day of losses as investors fretted about the risk the
Federal Reserve will begin to taper its monthly debt purchases of $85 billion at
its policy meeting on Dec. 17 and 18.
Crucial to that decision could be the payrolls report for November due later
Friday. The median forecast is for an increase of 180,000 in payrolls with the
jobless rate steady at 7.2 percent.
The market would tend to see anything over 200,000 as greatly adding to the
chance of a tapering this month, while a result under 150,000 would diminish
the risk.
Still, it is worth remembering that total U.S. employment is over 136 million so
the difference in a monthly rise in jobs of 150,000 or 200,000 is statistically
insignificant, yet it has the power to move markets massively.
Not helping was that Thursday's U.S. data seemed strong on the surface but the detail was not so positive. While economic growth was
revised up to an annualised 3.6 percent for the third quarter, all the increase came in a build up of inventories.
That led analysts to assume inventories would be run down this quarter and thus drag on growth.
Yet the headline number was enough to send yields on the benchmark 10-year U.S. Treasury note up to a three-month high of 2.88
percent.
For once, the rise in yields did not lift the U.S. dollar, in part because European yields jumped even more after European Central Bank
President Mario Draghi sounded in no hurry to take further stimulative action.
In particular, the market was spooked when Draghi played down the need for another long-term liquidity operation (LTRO). Dealers had
been hoping for just such an operation to ease a liquidity squeeze over year end.
As a result yields on two-year German government debt spiked to 21 basis points, from just 12 at the start of the week, and took the euro
higher in their wake.
Early Friday, the single currency was up at $1.3671 having finally smashed through tough resistance at $1.3620. The next chart target
was $1.3705/18, which would not be too distant from the 2013 peak of $1.3832.
Against the yen, it edged up to 139.14, but struggled to break above a five-year peak of 140.03 set earlier in the week. The dollar fared
worse, dropping back to 101.71 yen and further away from the week's high of 103.37.
In commodities markets, spot gold was nursing losses at $1,224.69 after dropping 1 percent on Thursday.
U.S. crude was up 4 cents at $97.42, still benefiting from a drop in U.S. crude stocks. Going the other way, Brent crude fell 84 cents to
$111.04.