Asian stocks rose on Monday, while the dollar weakened, following the release of the much-anticipated May U.S. payrolls data, which indicated that the recovery is on pace but not strong enough to prompt the Federal Reserve to begin reducing its monetary policy sooner than expected.
Investors were watching to see how large tech companies’ stock prices would respond to the G7’s agreement on a minimum worldwide corporation tax rate of at least 15%, but winning the G20’s consent might be difficult.
So far, the reaction has been mild, with Nasdaq and S&P 500 futures hardly moving.
The battle over US President Joe Biden’s proposed $1.7 trillion infrastructure plan will also be watched closely, with the White House rejecting the latest Republican offer.
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.3 percent, breaking a three-session losing streak. The Nikkei 225 index in Japan jumped 1.0 percent to its highest level in over a month, while the KOSPI in South Korea climbed 0.7 percent.
While the 559,000 increase in U.S. payrolls fell short of expectations, it was still a welcome reprieve after April’s surprisingly dismal data, and the unemployment rate of 5.8% indicated that the Fed’s aim of full employment was still a long way off.
“The data was perfect for a goldilocks type outlook for risk: not too hot to bring in fears of a faster Fed taper, and not too cold to worry about the outlook for the recovery,” said NatWest Markets strategist John Briggs.
“This caused a weaker USD, better stocks, reinforced the earlier bid in commodities, and boosted emerging markets.”
The focus now shifts to Thursday’s consumer price data in the United States, where there’s a chance of another high number, despite the Fed’s insistence that the surge is just temporary.
Briggs predicted that in the June policy meeting, Fed policymakers will open the door to discussing tapering, with a start date of early 2022 and no rate rise until 2024.
The European Central Bank meets on Thursday and is generally anticipated to keep its stimulus measures in place, with tapering a long way off.
After falling 7 basis points on Friday and returning to the bottom of the three-month trading range, yields on US 10-year notes were a bit higher at 1.567 percent.
The dollar was forced on the defensive as a result of this loss, which was compounded by an increase in risk appetite. It was last trading at 90.100 per dollar versus a basket of currencies, down from a high of 90.629 on Friday.
After rebounding from a three-week low of $1.2102 on Friday, the euro was holding at $1.2170, while the dollar was back at 109.52 yen, down from a high of 110.33.
Gold held firm at $1,890 an ounce, up from a low of $1,855 on Friday, thanks to a drop in the dollar. (/GOL/)
Oil prices have remained stable after Brent surpassed $72 per barrel for the first time in 2019 last week, as OPEC+ supply restraint and improving demand offset concerns about a patchy worldwide COVID-19 immunization implementation. [R/O]
Brent was up 6 cents to $71.92 a barrel, while US crude was up 9 cents to $69.71.