Asian Shares Flatten as Uncertainty Looms Large Ahead of US Payrolls Report

The major Asia Pacific stock indexes are trading mixed on Friday on relatively low volume ahead of Friday’s U.S. payrolls data for September. With investors rattled throughout the week because of a series of weaker-than-expected U.S. economic reports, today’s jobs report is expected to take on added importance.

The report could fan the flames of recession and further encourage the Fed to cut rates at the end of October, or it could show a dented, but relatively strong jobs market. Both outcomes are expected to trigger a volatile reaction in the financial markets.

At 04:10 GMT, Japan’s Nikkei 225 Index is trading 21344.74, up 3.00 or +0.01%. South Korea’s KOSPI is at 2029.95, down 1.96 or -0.10% and Hong Kong’s Hang Seng Index is at 25966.64, down 143.67 or -0.55%.

Australia’s S&P/ASX 200 Index is 6515.90, up 22.90 or +0.35%. The markets are closed in China.

Little Reaction to Wall Street’s Rebound Rally

The markets in Asia are showing little reaction to the dramatic recovery on Wall Street on Thursday. U.S. stocks sold off early in the session in reaction to a weaker-than-expected ISM Non-Manufacturing PMI report. This was the third piece of bad news this week. The first was a dismal ISM Manufacturing PMI report that extended its contraction for a second straight month in September. The second was the ADP private sector jobs report that showed down in hiring.

At the end of the session, expectations for an October rate cut jumped to 93.5% from 77% on Wednesday, according to the CME Group’s Fed Watch tool. Last Friday, this tool indicated a 20% chance of a 25-basis point rate cut at the Federal Reserve’s monetary policy meeting on October 29-30.

US Non-Farm Payrolls Estimates

At 12:30 GMT, the U.S. government will release the September U.S. Non-Farm Payrolls report. Non-Farm Employment Change is expected to show the economy added 145K jobs last month. This is up slightly from the previously reported 130K.

Average Hourly Earnings are expected to have risen 0.3% and the unemployment rate is expected to remain at 3.7%.

A weaker than expected headline number should drive the probability of a Fed rate cut to 100%. Treasury yields are likely to plunge and demand for safe-haven gold and Japanese Yen should jump.

Stocks will be volatile with some investors believing they’re a buy because of lower rates. Others will sell because they feel the rate cuts aren’t working to revitalize the economy and that the Fed may need to be more aggressive. Furthermore, the data will fan the flames of a global recession that should be bearish for Asia Pacific stocks.