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Asia shares weaker as markets eye sterling drop, look ahead to U.S. jobs

Published Oct 06, 2016 11:35PM ET
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Investing.com - Asian shares fell on Friday with a plunge in sterling in the Asian day causing concern ahead of U.S. jobs data seen as a crucial part of the picture for chances of a rate hike by the Fed in December.

Market participants were focusing on Friday’s U.S. nonfarm payrolls report for further indications on the strength of the job market, as the Federal Reserve has indicated that future interest rate decisions will be data-dependent.

The consensus forecast is that the data will show jobs growth of 175,000 in September, following an increase of 151,000 in August. The unemployment rate is forecast to hold steady at 4.9%, while average hourly earnings are expected to rise 0.2% after gaining 0.1% a month earlier.

A strong nonfarm payrolls report would reinforce the view that a U.S. rate hike in December may be on the cards, after hawkish signals from senior Fed officials in recent weeks revived speculation of a rate hike before the end of the year. According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 63.4% chance of a rate hike by December. November odds were at 14.5%.

The Nikkei 225 fell 0.23% and the S&P/ASX 200 dipped 0.10%. Markets in China re-open next week after a week-long holiday.

The yen gained in Asia on Friday on safe-haven demand as the British pound fell sharply on growing concerns over the terms of a break from the European Union following comments by the government earlier this week the formal move would come by March of next year.

Concerns that France and other leading eurozone countries would demanding tough Brexit conditions sparked the sharp and surprise Asian fall, with traders suggesting a thin market ahead of U.S. payrolls allowed the sharp drop and China's return to the markets next week after a week-long holiday.

Also in Japan, average cash earnings for September dropped 0.1%, widely missing the 0.5% gain seen year-on-year for the first drop in three months following growth in July and June.

The government maintains the view that wage hikes are gradual and need close watching. Firms are slow to raise wages amid uncertainty over global and domestic growth. Consumer spending has been sluggish in the face of a slow wage recovery despite labor shortages in some sectors.

Earlier in Australia, the September AIG construction index came in at 51.4, a jump of 4.8 points into expansion from 46.6 in August.

"While residential building remains at healthy levels, the easing of current activity and new orders recorded in the Australian PCI suggests that we are near the top of the current cycle and that residential building is losing its position at the forefront of the restructuring of the economy," said I head of policy Peter Burn, who noted road and rail projects underway or under consideration are aiding the economy.

Overnight, U.S. stocks were mixed after the close on Thursday, as gains in the Basic Materials, Oil & Gas and Industrials sectors led shares higher while losses in the Healthcare, Telecoms and Consumer Services sectors led shares lower.

At the close in NYSE, the Dow Jones Industrial Average fell 0.07%, while the S&P 500 index climbed 0.05%, and the NASDAQ Composite index declined 0.17%.

Asia shares weaker as markets eye sterling drop, look ahead to U.S. jobs
 

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