SYDNEY: Asian shares fell in line with Wall Street on Thursday, while a sharp drop in oil prices to a five-month low promised to alleviate inflationary pressures and provided a boost to the global bond market.
The US labor market displayed softness overnight, with analysts noting that the ADP private payrolls report historically lacks reliability as a predictor of the official non-farm payroll report due on Friday. Therefore, the weekly jobless claims later in the day are considered more significant.
MSCI's broadest index of Asia-Pacific shares outside Japan declined by 0.9%, having been down 2.0% so far this month after a 7.3% rally in November. Japan's Nikkei fell 1.6%, led by declines in energy and tech stocks.
Sentiment regarding China remained bearish. Chinese trade data revealed that exports unexpectedly rose in November, but imports posted a surprising fall, indicating shaky domestic demand. This followed a credit outlook cut from rating agency Moody's on the Asian giant a day earlier.
China's blue chips eased 0.5% to hit a fresh five-year trough, while Hong Kong's Hang Seng index plunged 1.6% to a new 13-month low.
Oil prices rebounded slightly after falling nearly 4% overnight to their lowest settlements since June. Brent crude futures edged up 0.6% to $74.72 a barrel, while U.S. West Texas Intermediate futures rose 0.6% to $69.8 a barrel.
Amy Xie Patrick, head of income strategies at Pendal Group, commented, "That's probably the oil market giving you a bit of a heads up for what they think demand is going to be like over the next few months." Combined with recent price actions in the equity and bond markets, Xie Patrick noted concerns arising about whether the global economy could be heading toward a hard landing next year.
Overnight, Wall Street was pulled lower by energy stocks as oil prices slid. The Dow Jones slipped 0.2%, the S&P 500 lost 0.4%, and the Nasdaq Composite fell 0.6%.
An index by State Street Global Advisors showed global investors became less pessimistic in November, with the risk appetite index edging up to 0 from -0.55 the previous month.
Asian bonds rallied along with Treasuries. The Australian 10-year government bond yield hit a 2-1/2 month low of 4.225% on Thursday.
The yield on the benchmark U.S. 10-year Treasury note was little changed at 4.1208%, after an 11 basis point drop overnight to a three-month low of 4.1040%.
The U.S. dollar hovered near a two-week high at 104.15 against its major peers heading into the NFP release on Friday. Markets have priced in so much easing that they are vulnerable to an upside payroll surprise.
Economists expect the economy added 180,000 new jobs in November, picking up from 150,000 the previous month.
Softening economic data and recent comments from Federal Reserve officials, including Chair Jerome Powell, have heightened expectations that U.S. rates have peaked, and a total of more than 125 basis points in cuts could commence as early as March.Gold prices were 0.2% higher at $2,028.99 per ounce.__ Reuters
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