Asian Stocks Set To Slide As US Jobs Slump Spurs Fed Cut Bets
Asian equities are expected to open lower on Monday after weak US employment data triggered a sell-off on Wall Street and strengthened speculation of a Federal Reserve interest rate cut in September, pushing US Treasury yields sharply lower.
Futures for equity indices in Japan, Australia and Hong Kong all pointed to early losses, with Tokyo contracts down more than 2%, indicating that Friday's risk-off sentiment is spilling into Asian markets.
On Wall Street, the S&P 500 ended Friday 1.6% lower, while the tech-heavy Nasdaq 100 dropped 2%, marking the steepest single-day decline in months for both benchmarks. US index futures were little changed in early Asian trading.
Oil prices retreated 0.6% after OPEC+ confirmed another significant production increase in September, completing the unwinding of earlier supply cuts. Meanwhile, the US dollar traded mixed against its Group-of-10 peers following a 0.9% slide on Friday, as Treasury yields plunged.
The US labour market slowed markedly over the past three months, with May and June payroll figures revised down by almost 260,000 jobs. July data showed an average monthly gain of just 35,000 jobs, the weakest pace since the pandemic.
The 10-year US Treasury yield dropped 16 basis points on Friday, while two-year yields fell 28 basis points, reflecting heightened expectations that the Fed will ease policy at its September meeting. Some analysts even anticipate a 50-basis point cut, double the usual move.
'September is a lock for a rate cut and it might even be a 50-basis point move to make up the lost time,' said Jamie Cox, managing partner at Harris Financial Group.
Elsewhere in Asia, Thai Prime Minister Paetongtarn Shinawatra faces a Constitutional Court deadline today to submit a defence in an ethics case. In the UK, the Bank of England is expected to deliver a rate cut later on Monday.
In Brazil, President Luiz Inacio Lula da Silva signalled willingness to engage in trade talks with Donald Trump, provided Brazil is treated as an equal. Meanwhile, Trump's recent comments on India and a proposed 25% tariff rate have rattled markets, with the US president also warning of additional 40% tariffs on goods deemed to be 'transshipped' through other countries.
Gold held steady after rising on Friday, as Trump announced the deployment of two US nuclear submarines in response to remarks by former Russian President Dmitry Medvedev.
The US president further inflamed tensions by calling for the dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer following the jobs report, and demanded the Federal Reserve Board assume control of monetary policy if Chair Jerome Powell fails to cut rates.
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