Asian Stocks Mostly Rise as U.S. Jobs Data Signals Potential Rate Cut

Asian stock markets experienced a broad rally on Wednesday, while the U.S. dollar remained steady. This positive sentiment was fueled by a softening U.S. labor market, strengthening expectations for a Federal Reserve interest rate cut in September. However, concerns about a cooling U.S. economy tempered risk appetite.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.76%, but Japan’s Nikkei fell 1% due to the renewed strength in the Japanese yen. European stock futures also pointed to gains, with Eurostoxx 50, DAX, and FTSE futures all rising 0.5% ahead of PMI data releases.

U.S. job openings data for April revealed a larger-than-expected decline to a three-year low, signaling a softening labor market. This data bolstered expectations of rate cuts, with markets pricing in 45 basis points of easing. The probability of a rate cut in September increased to 65%, up from 46% the previous week.

Benchmark 10-year Treasury note yields reached 4.3435% on Wednesday, following a near three-week low of 4.314% on Tuesday after the jobs data release. The dollar index remained steady at 104.21, close to its recent two-month low.

In India, the Nifty 50 index experienced volatile trading following a sharp 6% decline on Tuesday, its worst session in four years. The uncertainty surrounding Prime Minister Narendra Modi’s reduced victory margin and its potential impact on economic policies contributed to the volatility.

Hong Kong’s Hang Seng Index outperformed, rising 0.33%, while China’s CSI300 Index gained 0.23%. Oil prices hovered near four-month lows as traders weighed an OPEC+ decision to increase supply later this year and the recent build-up of U.S. crude and fuel stocks.

Overall, Asian markets demonstrated resilience despite concerns about the U.S. economy and India’s election results. The focus now shifts to the upcoming U.S. payrolls report, which will provide further insights into the labor market’s health and potentially influence the Federal Reserve’s monetary policy decisions.