Asia Markets Mixed as Investors Digest U.S. Jobs Report

The early price action in the Asian markets suggests investors aren’t too concerned about the U.S. labor report, however, the upside may be limited because of worries over China’s economic slowdown. Asian market investors may be keeping their powder dry ahead of Wednesday’s big report day when the world’s second largest economy reports on Fixed Asset Investment, Industrial Production, Retail Sales and Unemployment Rate.
James Hyerczyk
Asia-Pacific Stock Markets

The major Asia-Pacific stock markets are trading mixed early Monday, following the volatile U.S. trade on Friday, which saw the cash market close lower and the futures market close higher. The catalysts behind the price action are concerns over a global economic slowdown, led by key economic misses in China and the United States last week.

At 01:04 GMT, Japan’s Nikkei 225 Index is trading 20993.70 down 31.86 or -0.15 percent. Australia’s S&P/ASX 200 Index is at 6179.30, down 24.50 or -0.39 percent. South Korea’s KOSPI Index is at 2128.10, down 9.34 or -0.44 percent.

The stock markets in Hong Kong and China have yet to open. Last week, the Hang Seng Index settled at 28228.42 and the Shanghai Index finished at 2969.86.

Markets Still Being Influenced by Last Week’s Economic Data

Traders had a chance to react to Friday’s news from China showing Chinese exports fell 20.7 percent on-year last month, lower than the expected decline of 4.8 percent. Imports dropped 5.2 percent, more than the 1.4 percent predicted drop.

However, today they are getting their first chance to assess the U.S. Non-Farm Payrolls report. This report showed the U.S. economy added just 20,000 jobs in February versus an expected gain of 180,000. This was the weakest monthly gain since September 2017. Although the headline number was perceived as bearish initially on Friday, the U.S. indexes were able to recover from the earlier losses, posting a lower, but strong finish into the close.

The intraday rebound in U.S. shares may have been fueled by the drop in the unemployment rate from 3.9 percent to 3.8 percent. Furthermore, average hourly earnings increased by 3.4 percent year over year. This number represented the highest level since the economic recovery began nearly 10 years ago.

Can We Believe the Headline Number?

The huge miss in the Non-Farm Employment Change portion of the report has raised some issues with traders and analysts. Sure it is possible the labor market is slowing, given the length of the recovery. However, the data is prone to large revisions especially because of the strength in average hourly earnings.

“I think it’s a very fluky number,” Larry Kudlow, director of the National Economic Council under President Donald Trump, told CNBC in a “Squawk on the Street” interview.

“A shockingly low jobs figure for February does not change the labor market narrative by itself,” said Ben Ayers, senior economist at Nationwide. “The three-month trend in job gains remains solid while survey data suggest no letup in demand for workers by employers.”

Today’s Early Price Action

The early price action in the Asian markets suggests investors aren’t too concerned about the U.S. labor report, however, the upside may be limited because of worries over China’s economic slowdown. Asian market investors may be keeping their powder dry ahead of Wednesday’s big report day when the world’s second largest economy reports on Fixed Asset Investment, Industrial Production, Retail Sales and Unemployment Rate.

Furthermore, investors may be holding out hope for the announcement of a trade deal between the U.S. and China.

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