Asian index futures signal gains as payrolls waiting game starts

[HONG KONG] Asian stocks looked set to extend gains amid a volatile week for equity markets, with the focus on Friday's US payrolls report and whether it will make or break the case for an interest-rate hike this month.

Futures on indexes in Japan, Australia and South Korea climbed in recent trading after both US and European shares closed higher on Thursday. The euro held losses near a two-week low after policy makers indicated they will boost stimulus to ward off a euro-area slowdown and to stoke inflation. US oil headed for a second weekly advance as the European Central Bank burnished prospects for commodities demand.

"A weaker jobs number on Friday may be the straw that breaks the camel's back for a September rate hike," Jasper Lawler, a markets analyst at CMC Markets Plc in London, said by e-mail. "Mario Draghi didn't let markets down. He obliged with not only a promise of more QE if needed but also announced the ECB can now purchase more of any one debt issue." While a reprieve from Chinese stock-market gyrations Thursday cleared the way for a global relief rally, Asian stocks are still down 3.8 per cent this week, putting them on track for the longest run of weekly losses since June 2011. Anxiety ahead of the jobs report saw US equities trim their gains, with investors predicting a slight tick up in payrolls for August from the previous month. Data Thursday showed jobless claims rose more than forecast last week and a services-industry gauge hovered just below a 10-year high.

Futures on Japan's Nikkei 225 Stock Average climbed 0.3 per cent in Chicago to 18,275, while contracts on the Standard & Poor's 500 Index added 0.1 per cent by 8:55 am in Tokyo. The euro traded at US$1.1126, while the yen was steady at 120.05 per dollar, set for a 1.4 per cent advance in the week, the best performance among major currencies. Oil in New York rose 0.2 per cent to $46.83 a barrel following a two-day, 3 per cent rebound.

Assets associated with China retreated, with copper futures on the Comex down 0.4 per cent to US$2.3760 a pound after rallying the past two days. New Zealand's dollar lost 0.1 per cent to 63.90 US cents, pushing its drop in the week to 1.1 per cent. Markets in Hong Kong resume Friday following a holiday, while mainland China remains closed amid celebrations marking the end of World War II.

Nikkei 225 futures also rose in the Osaka pre-market, climbing 0.2 per cent to 18,260 despite a bounce back in the yen. Japan's currency rallied 0.2 per cent Thursday as the ECB's comments bolstered some haven assets, including government bonds.

Futures on Australia's S&P/ASX 200 Index rose 0.4 per cent in most recent trading, while those on the Kospi index in Seoul gained 0.2 per cent. New Zealand's S&P/NZX 50 Index, the first major stock measure to start trading each day in the Asia- Pacific region, fell 0.2 per cent, with the index headed for a 2 per cent decline in the week.

The Dow Jones Industrial Average pared back an almost 200- point rally Thursday as traders anticipated the jobs data.

The nonfarm payrolls report represents the last major data point before the Federal Reserve meets on Sept 16-17 to discuss the timing of its first increase in interest rates in nearly a decade.

"The global outlook looks clouded with China weaker, the US reaching for the policy lever and once again it's central banks to the rescue," Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about US$22 billion, said in an e-mail to clients. "To some investors, some more free kicks from the central bank sound good, particularly in the wake of recent volatility, but despite three decades of successful policy implementation, the power of central banks to lift economies and financial markets is now looking increasingly clouded." Futures traders are betting the Fed will push back raising its fed funds rate. The probability of an increase in September has fallen to 30 per cent, from 38 per cent at the end of last week, according to data compiled by Bloomberg. The figures are based on the assumption that the benchmark will average 0.375 per cent after the first hike.

The Philippines is due to report on consumer prices Friday, and Malaysian updates on trade.

BLOOMBERG