ASX Set to Open Higher as Investors Anticipate US Jobs Data

The Australian sharemarket is expected to start the day on a positive note on Friday, as global investors prepare for crucial US jobs data that may impact the Federal Reserve's interest rate decisions.

Futures indicate a 0.3 percent increase in the ASX 200 when the market opens, following a slight decline of 0.2 percent on Thursday. Star Entertainment faced significant challenges, with its share price plummeting by one-third due to a looming cash crisis.

In the global markets, a sell-off in the US bond market has stabilized after causing concern for traders worldwide. The yields on US Treasuries have steadied after experiencing a sharp increase that brought 30-year yields to the highest levels seen since 2023.

On Thursday, US share markets were closed due to a national day of mourning for former President Jimmy Carter. The US dollar gained some ground, with the Australian dollar trading at 61.96 US cents by 8:20 am, and the 10-year Treasury yield remained relatively unchanged at 4.69 percent. Bitcoin saw a decrease of 2.5 percent, bringing its value down to $US92,121.89.

Focus on Upcoming Jobs Data

The primary focus for investors is the US jobs report, expected to be released early on Saturday morning (AEDT). Economists anticipate that US employers lowered their hiring levels in December, reflecting a year-end culmination of steady but moderating job growth that is expected to continue into 2025. Payrolls are predicted to increase by 165,000 in December, as the effects of previous hurricanes and strikes fade from the job market.

Experts anticipate that the unemployment rate will remain stable at 4.2 percent, while average hourly earnings growth is likely to see a slight cooling compared to previous rates.

According to Andrew Husby from BNP Paribas Securities, the Federal Reserve will likely only consider a rate cut this month if the employment data presents significant misses, such as payroll growth dropping below 100,000 and an unemployment rate exceeding 4.3 percent.

Investor Sentiment

A survey conducted by 22V Research has shown that many investors are more cautious about the payrolls ahead of the report than usual. Only 26 percent of respondents view the data as “risk-on,” while 40 percent consider it “risk-off,” and 34 percent believe the impact will be “mixed or negligible.”

Since mid-September, the Federal Reserve has reduced interest rates by 100 basis points. However, the yield on 30-year Treasury bonds has seen a similar rise, causing a divergence that confounds some market analysts. This trend is also observed in the UK, where 30-year yields have increased even though the Bank of England is easing its monetary policy.

Concerns About Long-Term Inflation

This behavior in bond markets is partially due to ongoing worries that inflationary pressures from the pandemic may have long-lasting effects on the global economy. Additionally, governments worldwide continue to borrow heavily after significant spending in response to the COVID-19 pandemic.

Strategists at Yardeni Research highlighted that the increase in bond yields since mid-September was anticipated, though it surprised many financial analysts. They cautioned that a continued increase in the 10-year US Treasury bond yield, potentially nearing last year's high of 5 percent, could create buying opportunities in both bond and stock markets.

The strategists assert that bond yields have now normalized and expect the 10-year yield to fluctuate between 4 percent and 5 percent, similar to levels observed prior to the Great Financial Crisis.

ASX, Stocks, Jobs