Asian Stocks Eye Early Gains After US Jobs Report: Markets Wrap

(Bloomberg) — Stocks slipped and bond yields extended their rise as strong US economic data forced traders to pare wagers on how much the Federal Reserve might cut interest rates this year.

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Contracts on the S&P 500 shed 0.6% and Nasdaq 100 futures fell 0.8%. The yield on 10-year US Treasury bonds rose back to 4%, a level not seen since August, as Friday’s blowout US jobs number undercut chances of a big rate reduction in November. Money markets now price less than a quarter-point move next month, having expected a 50 basis-point move recently.

That could weigh on markets, which have rallied in record highs on signs of a robust US economy, easing inflation and big rate cuts.

While the broader picture for markets remains constructive, “we have to be a bit careful in terms of drivers, as we will probably not get a lot of big aggressive rate cuts,” Marija Veitmane, head of equity strategy at State Street Global Markets, said on Bloomberg TV.

Europe’s Stoxx 600 index, meanwhile, is taking a hit from signs of a weakening domestic economy. The gauge edged 0.3% lower after German factory orders dropped the most since January. Investors are also wary about Israel’s potential response to Iran’s recent missile attack, with Brent crude futures pushing above $79 a barrel.

Among individual stocks, Heidelberg Materials AG benefited from a report that the Adani Group has started talks to buy the company’s Indian cement operations, and luxury-goods firm Richemont rose after an announcement it would sell the online retailer YNAP to Mytheresa.

Pfizer Inc. climbed more than 2% in US premarket trading, after Bloomberg reported activist investor Starboard Value has taken a stake of about $1 billion in the firm. Arcadium Lithium Plc. leapt 28% on news Rio Tinto Plc had made a non-binding takeover approach.

In currency markets, the dollar was steady after jumping 1.6% last week, while the yen edged higher after newly appointed Finance Minister Katsunobu Kato said sudden currency moves hurt companies and households and the government needs to monitor the impact.

Investors are now looking ahead to the US inflation data due Thursday as well as the minutes from the Fed’s September policy meeting. The earnings season also kicks off this week with reports from big US banks. Earnings growth is seen robust though it’s expected to slow from the second quarter.

Here are some key events this week:

Euro-area finance ministers meet in Luxembourg on Monday. ECB President Christine Lagarde will participate
Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic, St. Louis Fed President Alberto Musalem and Fed Board member Michele Bowman speak at different events on Monday as investors listen for any clues to policymakers’ thinking ahead of next month’s meeting
Brazil and Mexico publish CPI data, New Zealand, Israel and India hold interest rate decisions
US CPI for September, the final inflation print before the presidential election, is due Thursday
President Biden embarks on a trip to Germany and Angola, through Oct. 15, his first trip abroad since withdrawing from the presidential race, on Thursday
New York Fed President John Williams gives keynote remarks at Binghamton University in New York. Richmond Fed President Thomas Barkin speaks in a fireside chat on the economic outlook on Thursday