A woman walks past an electric board showing the Nikkei index and exchange rate between the Japanese Yen and the U.S. dollar outside of a brokerage in a business district in Tokyo.
SYDNEY Reuters - Asian share markets were still in a cautious mood on Monday after a mixed U.S. job report triggered a rally in beaten-down bonds, but new hurdles lay ahead in the shape of U.S. and Chinese inflation figures due later this week.
MSCI's broadest index of Asia-Pacific shares outside Japan were a fraction lower in thin trade yesterday, after losing 2.3% in a week last week.
Japan's Nikkei slipped 1.0% to its worst performance since July as it hit a record low. A summary of the Bank of Japan's last meeting showed members said cutting yield policy more flexible would extend the life of its super-easy stimulus.
The other side, the S&P 500 futures added 0.2% and the Nasdaq futures 0.3% in early trade.
With about 90% of S&P 500 earnings reported, results are 4% better than consensus estimates with more than 79% of companies beating the Street. The results for this week will include news Corp. and Walt Disney.
Data on U.S. consumer prices due Wednesday are forecast to show headline inflation picking up slightly to an annual 3.3%, but the most important core rate is seen slowing to 4.7%.
Goldman Sachs analysts see a potential downside risk to the numbers in part due to falling car prices, an outcome that could help keep the bond rally alive and kicking.
In China, the market is experiencing further signs of deflation, with annual consumer prices falling around 0.5% and producer prices falling 4%.
Any upside surprises would be a test for Treasuries which bear steepened markedly early last week ahead of a flood of new borrowing. A mixed payrolls report helped reverse much of the losses, particularly at the short tend.
Futures imply only a 12% chance of a Federal Reserve rate hike in September and 24% for a rise by year-end.
Michael Gapen, an economist at BofA, cautioned that the market was still expecting too much policy easing next year given the recent run of robust economic data.
Now we expect a soft landing for the U.S. economy, not the mild recession we had previously forecasted, said Paul Gapen, president of the National Institutes of Health.
While the market suggests around 120 bps of Fed cuts in 2024, we look for only 75 bps, he said. There's simply less reason for the Fed to quickly pivot to rate cuts in 2024 when growth is positive and unemployment is low. The bank increased its forecast for two-year and 10-year yields by 50 basis points to 4.75% and 4% respectively.
On Monday, two-year yields rose to 4.80%, with the 10-year yield at 4.06%.
The pullback in yields took some steam out of the U.S. dollar, which was idling at 141.90 yen and short of last week's peak of 143.89.
The euro rose to $1.1000 after it bounced back from a trough of $1.0913 last week.
The drop in the dollar helped gold stay stable at $1,942 an ounce, after Friday's rally from $1,928. GOL oil prices rose after a six-month rally in response to tightening supplies. The Brent price hike is a threat to hopes for a continued disinflation across the developed world due to the upward pressure on food prices from the war in Ukraine and global warming. O'R Brent rose 17 cents to $856.41 a barrel, while U.S. crude rose 12 cents to $852.94.