Dollar weaker, Asian index futures rise as jobs dim rate outlook

[TOKYO] As investors mulled Friday's disappointing US payrolls data one thing was clear, the dollar is losing out as prospects of the Federal Reserve pulling the trigger on higher interest rates this year diminish.

Bloomberg's Dollar Spot Index extended its decline into a third day with traders pushing out bets on the first US rate hike since 2006 to March next year. Sentiment was more mixed in equity markets, with most Asian index futures signaling gains while contracts on US stocks retreated. Copper futures jumped as gold held onto its Friday surge, while oil was subdued after Saudi Arabia reduced crude pricing amid weakening demand.

Global stocks ended last week higher as the below-estimate jobs data put off the threat of an imminent US rate rise, which along with the slowdown in China had been a source of turmoil last quarter. On Friday, the Standard & Poor's 500 Index staged its biggest intraday rebound from a loss of more than 1.5 per cent since October 2011 on prospects the record-low borrowing costs that fueled the recent bull market will remain in place for a while longer. Other central banks will be in focus this week, with Australia's and Japan's reviewing policy and minutes of the last European Central Bank meeting due.

"The Fed is extremely unlikely to begin policy normalization as soon as this month and December is looking tenuous too," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a client note. "At a time when the factors that appeared to stop the Fed from tightening last month are still lingering - fragile global backdrop and low inflation - the Fed would certainly risk creating some confusion and market volatility if it was to forge ahead with tightening at this stage." Stocks S&P 500 Index futures dropped 0.1 per cent to 1,941.75 by 8:47 am Tokyo time, after the gauge reversed a drop of as much as 1.6 per cent to end Friday up 1.4 per cent. The US benchmark has risen over the past four sessions, with equities trying to solidify a rally following their worst quarterly slump in four years.

Yen-denominated contracts on Japan's Nikkei 225 Stock Average added 0.3 per cent in Chicago to 17,920, after ending the Friday session up 1.4 per cent. Futures traded in Osaka were bid up 1 per cent to 17,850 in the Osaka pre-market, after falling 0.1 per cent by 3 am Saturday.

"Throughout this year we've had moments when stocks rose on an increased probability of rate increases in the US, but at the end of last week the market saw the probable delay as a positive," Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo said by phone. "We're still in a state of waiting for monetary policy." The S&P/ASX 200 Index in Australia, where there is no settlement Monday due to a holiday in Sydney, looked set to track Friday's recovery in the US with index futures up 1.4 per cent in most recent trading. Contracts on South Korea's Kospi index rose 0.7 per cent and the S&P/NZX 50 Index in Wellington, the first major stock measure to start trading each day in the Asian region, rose 0.7 per cent.

Futures on Hong Kong's Hang Seng Index dropped 0.2 per cent Friday before the late-in-the-session rally in US shares. Contracts on the Hang Seng China Enterprises Index, which tracks Chinese equities listed in the city, were down 0.1 per cent. Markets in mainland China remain closed through Wednesday for the National Day holiday.

Data on the services industries in Japan and Singapore is due Monday along with an update on currency reserves from Taiwan. Australia reports on job advertisements.

MSCI's All-Country World Index ended Friday up 1.2 per cent in a third day of gains, capping a three-day rally of more than 3.6 per cent. The index had slumped 9.9 per cent in the third quarter, the most since the same period of 2011, as almost US$10 trillion was wiped off the value of equities worldwide.

Currencies The New Zealand dollar rose 0.2 per cent to 64.42 US cents, after climbing 0.5 per cent on Friday, while Australia's was up 0.1 percent to 70.52 US cents following three days of gains.

The Bloomberg dollar index, a gauge of the greenback against 10 major peers, slipped 0.1 per cent Monday after dropping 0.3 percent in the previous session. The index retreated 0.4 per cent last week, extending losses after the US jobs data.

Employers in the US added 142,000 workers to nonfarm payrolls in September, the government said Friday, well below the 201,000 increase projected by economists in a Bloomberg survey. The jobless rate held at 5.1 per cent, a seven-year low, as wages stagnated and people left the labor force.

The data saw bets on a rate hike at the Fed's Oct 27-28 meeting slide to 10 percent, from 18 percent a week earlier and 41.5 per cent a month ago, according to trading in Fed funds futures collated by Bloomberg.

The euro was little changed at US$1.120 after rising 0.2 per cent on Friday to cap a gain in the week of 0.2 per cent. The common currency was steady at 134.65 yen.

Portugal's ruling coalition didn't win a majority in parliamentary elections, Prime Minister Pedro Passos Coelho said in comments broadcast on the RTP TV station. The vote was Portugal's first since it exited an international bailout program last year.

Commodities Copper futures due in December climbed 0.9 per cent to US$2.3460 a pound on the Comex, extending Friday's 0.9 per cent advance. The Bloomberg Commodity Index jumped 0.9 per cent last session as the prospect of a weaker dollar for longer buoyed the outlook for raw materials prices.

Gold for immediate delivery was little changed at US$1,138.11 an ounce after climbing 2.2 per cent on Friday, the most since January. The prospect of a delay in US monetary tightening burnished gold's appeal as rising rates tend to see investors favor assets with better yield prospects.

West Texas Intermediate crude slipped 0.3 per cent to US$45.42 a barrel after rising 1.8 per cent on Friday, while Brent dropped the same amount to US$48.

Saudi Arabian Oil Co reduced its official selling price for medium-grade crude to Asia next month to a discount of US$3.20 a barrel below the regional benchmark, compared with a US$1.30 discount for October sales, the company said Sunday. The discount for the medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a US$2 a barrel cut in February 2012, according to data compiled by Bloomberg.

BLOOMBERG