Asian markets open higher after disappointing US payrolls

Asian markets rally this morning after the September US payrolls data showed a much smaller increase in jobs than expected on Friday. Disappointing US numbers will have to keep the super-loose policy for longer and create questions about global growth and inflation outlook.  With US markets closed today for a Labour holiday, market conditions are going to be thin with investors still assessing the fallout from Friday’s job report. The focus this week will be on US producer price data for August on Friday, while weekly jobless claims on Thursday will also be closely watched. In Europe the main event is the ECB meeting on Thursday with the ECB expected to debate on whether to scale back the stimulus. UK publishes a GDP estimate on Friday with expectations for the monthly growth to slow.

The long-awaited jobs report triggered small moves in the equity markets. On Friday, Labour Department reported that the economy added just 235,000 jobs in August falling far short of economists’ estimates of 750,000. The S&P was little changed, while Nasdaq 100 rose 0.3%. The Dow Jones Industrial average fell 0.2%.  US dollar dropped to four weeks low on Friday with DXY dipping to 91.941 and since then has edged higher and steadied at 92.155. The yield of 10-year Treasuries rose four basis points to 1.32.  This Friday’s Producer Price data for August will show how inflation pressures are shaping after July data showed the largest annual increase in over a decade. Markets participants will also be watching out for any fresh clues on tapering from Fed officials speaking this week.

European stock markets have opened higher this Monday with DAX 0.3% higher, CAC 40 0.1% higher and FTSE 100 rising 0.2%. Lacklustre trading start in Europe is exacerbated by US public holiday following the disappointing labour report on Friday. EURUSD is flat at $1.1877, after reaching $1.1909 last week, its highest level since June 29. Germany’s 10-year yield has advanced two basis points to -0.36%. The focus in Europe is on the European Central Bank meeting on Thursday. Several hawkish policymakers are calling to begin slowing asset purchase program given a recent spike in inflation. Inflation in the euro area has spiked to a 10-year high of 3%. However, the ECB is expected to stand put on rates once again leaving the size of its PEPP at EUR 1.85 trl, with purchases set to run until at least the end of March 2022.

Japan’s Topix index rose on Monday to its highest level in more than three decades, while the Nikkei has also jumped. The Nikkei shares gained 1.83%, while Topix jumped 1.28% to its highest close since August 1990. Japan’s market built on after Prime Minister Yoshihide Suga offered to resign, raising hopes that the ruling coalition could win an upcoming election. Chinese equities also rose sharply, led by tech shares, as plans for a new stock exchange in Beijing and a slew of market-friendly government rhetoric boosted the sentiment.  CSI 300 index rose 1.9%, while Shanghai Composite Index gained 1%. Hong Kong shares also rose.

Oil prices extended losses on Monday with Brent Crude futures down 1.2% and WTI also falling 1.2%. The prices dropped after the world’s top exporter Saudi Arabia cut crude prices for Asia over the weekend, signalling demand concerns and that global markets are well supplied. State oil giant Saudi Aramco notified customers on Sunday that it will cut October official selling prices by at least $1 a barrel.