Asian Shares Mixed on Muted Reaction to U.S. Non-Farm Payrolls Report

The major Asia/Pacific stock indexes are trading mixed on Monday morning with investors showing a muted reaction to Friday’s U.S. jobs report and reports of progress in trade negotiations between the United States and China.

The price action suggests investors have moved on from the employment report while growing weary of the same headlines regarding the trade negotiations between the two economic powerhouses. The early trade reflects the subdued efforts by U.S. investors on Friday. Furthermore, investors could also be positioning themselves ahead of the start of U.S. earnings season later this week.

At 04:00 GMT, Japan’s Nikkei 225 Index is trading 21765.34, down 42.16 or -0.19%. South Korean’s KOSPI Index is at 2207.09, down 2.52 or -0.11% and Hong Kong’s Hang Seng Index is at 30027.80, up 91.48 or +0.31%.

Finally, China’s Shanghai Index is trading 3243.64, down 2.93 or -0.09% and Australia’s S&P/ASX 200 is at 6215.90, up 34.60 or +0.56%.

U.S. Job Market Recap

Early Monday, Asian investors had a chance to react to the U.S. Non-Farm Payrolls report from Friday. The price action essentially mirrored the reaction by U.S. traders. Investors appreciated the big jump in payrolls, which showed the economy added 196,000 jobs in March, beating economists’ predictions of 175,000 jobs. However, concerns were raised by the dip in Average Hourly Earnings, which indicated weakening inflation. This may have caused the buying to dry up.

U.S.-China Trade Relations:  Same Old, Same Old

Over the week-end, Chinese official broadcaster CCTV reported that there was “new progress” in trade talks that wrapped in Washington on Friday, Reuters reported. These comments reiterated those of U.S. officials last week. On a positive note, new developments last week included the discussion of a draft agreement text on “contentious issues such as technology transfer, protection of intellectual property rights, and the bilateral trade balance, among others,” according to CNBC.

The tone remains positive, but investors may be growing a little tired of the day-to-day commentary, and are likely desiring something more concrete like the announcement of the deal that finally ends the trade dispute. President Trump said last week that a deal may be about four weeks away.

Earnings Season Worries

First quarter earnings season kicks off on Friday, April 12, with J.P. Morgan Chase announcing before the market opens.

According to Data Trek Research’s Nicholas Colas, “Right now expectations are for a negative 3.9% comp from last year. That’s the worst comp and the first negative comp since 2Q of ’16.”

“Analysts have been taking their numbers down dramatically over the course of the quarter. We started the quarter basically thinking up 3% now we’re looking more like down 4%,” he added. “That’s the biggest decline since the first quarter three years ago.”

Colas and other analysts don’t think most investors are prepared for disappointing numbers. However, there are some who believe investors may be able to ride out the weakness due to an optimistic outlook for a trade deal and the dovish Federal Reserve.