By Stella Qiu
SYDNEY (Reuters) -Asian shares edged higher on Thursday as investors braced for a key U.S. jobs report that may justify imminent rate cuts by the Federal Reserve and waited on the passage of a massive U.S. tax and spending bill in Congress.
Wall Street climbed overnight to close at new record highs after President Donald Trump announced that the U.S. has struck a trade deal with Vietnam, including a 20% tariff on exports to the U.S. That fuelled hopes that more deals will be forthcoming, with negotiations underway for a trade agreement with India.
The MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.2% to hover just below a near four-year top. Japan’s Nikkei was flat.
China’s blue chips edged up 0.2%, while Hong Kong’s Hang Seng index fell 0.6% after data showed China’s services activity expanded at the slowest pace in nine months in June.
Both Nasdaq futures and S&P 500 futures were little changed in Asia [.N]
Investors were waiting for Trump’s massive tax and spending bill to pass the House of Representatives for possible final approval. The bill is expected to add $3.3 trillion to the national debt, slash taxes and reduce social safety net programs.
The main risk event for markets will be the U.S. payrolls figures due later in the day. Analysts are forecasting a rise of 110,000 in June with the jobless rate ticking up to 4.3% but the stakes are high after a private sector payrolls report surprised with the first fall in over two years.
The resilience of the labour market is a major reason the majority of Federal Reserve members say they can afford to hold off on cutting rates until they can gauge the real impact of tariffs on inflation.
“These labour market indicators warn of the risk that the unemployment rate could spike to 4.4%, the highest since October 2021,” said Tony Sycamore, analyst at IG.
“This would quickly increase the probability of a July Fed rate cut to around 70%.”
Futures imply just a 25% probability for a rate cut this month from the Fed, which has not eased policy at all this year, drawing the ire of Trump who reiterated his call on Wednesday for Chair Jerome Powell to resign.
The Treasuries market was tense before the data as a weak jobs report would send yields sharply lower. Ten-year Treasury bond yield slipped 2 basis points to 4.265% on Thursday, while two-year yields eased 2 bps to 3.77%.
The dollar is again under pressure, having caught some relief overnight. Concerns about the Fed’s independence in the wake of Trump’s criticism have driven the dollar to its lowest against its peers in over three years.
Trump, who said rates should be cut to 1% from the current Fed benchmark rate of 4.25% to 4.50%, has repeatedly railed against Powell for not lowering borrowing costs since his return to the White House in January.
The euro inched up 0.1% to $1.1807, just a whisker away from a nearly four-year top of $1.1829 hit on Tuesday, while sterling added 0.1%, recovering a steep 0.8% fall overnight, as fears about the future of its finance minister Rachel Reeves eased.
Investor anxiety over UK finances after the British government’s reversal on welfare reforms caused gilt yields to jump overnight, up nearly 23 basis points at one point, the most since October 2022.
In commodities markets, oil prices were slightly lower after jumping 3% overnight as Iran suspended cooperation with the U.N. nuclear watchdog. U.S. crude futures slipped 0.4% to $67.20 a barrel while Brent was at $68.84 per barrel, also 0.4% lower on the day.
Gold prices eased 0.4% to $3,342 an ounce.
(Reporting by Stella Qiu)
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