Hong Kong (AFP) – Asian markets fell on Friday, tracking another retreat on Wall Street as attention turns to the release of key US jobs data later in the day and high-level China-US trade talks in Beijing.
While the corporate earnings season has been considered a success, analysts are worried that the healthy results have not fired equities as much as expected, with warnings of a mild correction down the line.
The major macroeconomic event this week is Friday’s non-farm payrolls figures for April, which will provide the latest snapshot of the world’s top economy. Analysts will be watching wage growth figures closely for signs of rising inflation.
There are growing concerns that with the US continuing to perform well, the Federal Reserve could be forced to lift interest rates three more times this year, having done so once already.
This, along with the fading likelihood of any near-term tightening by the European Central Bank and Bank of England, have boosted the dollar over the past week to multi-month highs against the euro and pound, as well as most other currencies. The greenback eased slightly Friday on profit-taking but expectations are for further gains.
“The dollar should continue to make gains against currencies across the board if fundamentals and central bank policy divergence matters,” said Greg McKenna, chief market strategist at AxiTrader, said.
“I believe it does and I can see a clear slowdown in growth globally at a time when the US seems to be the standout. And with inflation accelerating in the US but lagging elsewhere we have a clear policy divergence between the Fed and many other central banks.
“For me, that means that whatever happens with non-farms tonight … we are at the start of a big turn in the dollar.”
– Trade talks –
In Beijing the biggest hitters in Donald Trump’s administration are meeting their Chinese counterparts in Beijing to discuss the tariff spat between the two sides, which has fuelled fears of a potentially damaging trade war.
Treasury Secretary Steven Mnuchin and top White House economic adviser Peter Navarro, a prominent China critic, are among the delegation, though both sides have downplayed any chances of an early breakthrough.
Xi Jinping’s top economic adviser Vice Premier Liu He is leading the talks for China.
The meeting is the latest attempt to ease trade tensions after Trump sparked a series of tit-for-tat threats of tariffs on goods worth billions of dollars.
With uncertainty hanging in the air investors are keeping to the sidelines. Hong Kong fell 0.9 percent, Shanghai eased 0.2 percent and Sydney slipped 0.4 percent.
Seoul and Singapore each shed 0.8 percent, while there were also losses in Manila and Jakarta, though Wellington and Taipei edged up.
Tokyo was closed for a public holiday.
Oil markets are also awaiting Trump’s decision on the Iran nuclear deal, with speculation rife that he will tear it up, which many fear could spark geopolitical turmoil and put fresh upside pressure on crude prices.
Both main contracts are sitting around levels not seen since late 2014, though data showing rising US production and stockpiles is tempering strong rises.
– Key figures around 0250 GMT –
Hong Kong – Hang Seng: DOWN 0.9 percent at 30,057.21
Shanghai – Composite: DOWN 0.2 percent at 3,095.38
Tokyo – Nikkei 225: Closed for a public holiday
Euro/dollar: UP to $1.1991 from $1.1990 at 2100 GMT
Pound/dollar: UP to $1.3583 from $1.3571
Dollar/yen: DOWN to 109.00 yen from 109.19
Oil – West Texas Intermediate: UP two cents at $68.45 per barrel
Oil – Brent North Sea: UP four cents at $73.66 per barrel
New York – Dow: FLAT at 23,930.15 (close)
London – FTSE 100: DOWN 0.5 percent at 7,502.69 (close)