Posted by Kevin Buckland
TOKYO, Jul 5 (Reuters) – Most Asian stocks rose Monday, prolonging the rally that took global stocks to record highs after a US employment report signaled the economic recovery remained intact but not yet an immediate pullback the Federal Reserve’s incentives justified.
However, Japanese markets bucked the trend, with the Nikkei falling 0.5% after a spike in COVID-19 infections in Tokyo just weeks before the Olympics hosted.
MSCI’s broadest index for Asia Pacific stocks outside of Japan rose 0.3%, led by a 1% gain in Taiwan. Chinese blue chips added 0.1%.
Trading is expected to be thinner than usual with US markets closed for the long weekend of July 4th, meaning that “some of these upward moves may be limited and price action may be choppy,” said Kyle Rodda, market analyst at IG in Melbourne.
“But given Friday’s non-farm payroll numbers, things are still very, very optimistic and I think you’ll see that again later this week,” Rodda said.
“The conditions are right for stocks to continue to rise around the world.”
The MSCI All Country World Index closed last week at a record 724.66 and climbed 0.1% on Monday.
S&P 500 futures indicated a 0.1% decline for Tuesday’s open after the index closed 0.8% higher on Friday at a record 4,352.34. The Dow Jones Industrial Average rose 0.4% and the Nasdaq Composite rose 0.8% to hit a record high.
U.S. non-farm workforce rose more than 850,000 jobs last month. But the unemployment rate unexpectedly rose from 5.8% to 5.9%, while the closely watched average hourly earnings, a measure of wage inflation, rose 0.3% in the past month, lower than the consensus forecast for an increase of 0.4%.
“Goldilocks pressure suggests there is no need to speed up the tapering schedule or the implied rate hike profile,” Tapas Strickland, an analyst with National Australia Bank, wrote in a client note.
“Overall, the workforce is still 6.8 million below pre-February 2020 pandemic levels and still below the level of substantial progress needed by the Fed. So there is nothing in this report about that Fed could become restrictive. “
Eyes are on the minutes of last month’s Federal Reserve Open Market Committee meeting when policymakers surprised the markets by announcing two rate hikes by the end of 2023.
Comments from Fed officials have been more balanced since then, particularly from Chairman Jerome Powell, and investors will analyze Wednesday’s release for further clues as to the timing of the monetary tightening.
The US bond markets closed over the holidays after the benchmark US 10-year Treasury yield fell to 1.4306%.
The dollar was broadly unchanged on Monday after falling from a three-month high late last week, under pressure from the weaker details of the US non-farm payroll report.
The greenback was little changed at 111,055 yen and USD 1.18615 per euro.
Gold rose 0.1% to $ 1,789.46 an ounce.
Crude oil slipped as the OPEC + talks dragged on. Saudi Arabia’s Energy Minister pushed back on Sunday against opposition from another UAE Gulf producer to a proposed OPEC + deal, calling for “compromise and rationality” to reach an agreement when the group meets again on Monday.
Brent crude fell 29 cents to $ 75.88 a barrel and U.S. crude fell 24 cents to $ 74.92 a barrel.
(Adaptation by Sam Holmes)