GLOBAL MARKETS: Asian markets choppy as US jobs data douse Fed rate hike bets

SINGAPORE — Stocks opened mixed in Asian trading on Friday after a weaker-than-expected U.S. jobs report dampened expectations of an imminent interest rate hike from the Federal Reserve.

MSCI’s broadest index of Asia-Pacific shares outside Japan fluctuated between gains and losses, edging up 0.1% after two straight sessions of declines. South Korea’s KOSPI weighed on regional sentiment, tracking sharp declines in U.S. chipmakers overnight. Japan’s Nikkei 225 fell 1%, while U.S. equity futures were slightly higher, with S&P 500 e-mini futures and Nasdaq e-mini futures both up 0.1%.

U.S. labor market data released Thursday showed job growth slowed sharply in June, while payroll gains for the previous two months were revised lower. The unemployment rate slipped to 4.2% from 4.3% in May, as fewer people participated in the labor force, pushing participation to its lowest level in more than five years.

Analysts said the data challenged expectations that the Federal Reserve would remain on track to raise interest rates in the second half of the year. “The figures challenged the narrative that the Fed remains on track to hike in the second half of this year,” Westpac analysts wrote in a note.

Markets are now pricing in a lower chance of near-term tightening, with Fed funds futures implying a 46.8% probability that the central bank will keep rates steady at its September 15–16 meeting, compared with 35.8% a day earlier, according to CME Group’s FedWatch tool.

On Wall Street overnight, trading was mixed. The S&P 500 was flat, the Nasdaq Composite fell 0.8%, and the Dow Jones Industrial Average closed at a record high. U.S. markets will be closed Friday for the Independence Day holiday.

In currency markets, the U.S. dollar rose 0.2% to 161.435 yen as liquidity thinned due to the holiday. The dollar had recovered some ground after volatile trading on Thursday, when the yen briefly strengthened following reports of changes in Japanese authorities’ approach to currency intervention.

The U.S. Dollar Index was steady at 100.98 after slipping 0.5% in the previous session.

In commodities, Brent crude futures slipped 0.4% to $71.49 as Asian trading resumed, while gold rose 0.1% to $4,125.49.

In cryptocurrencies, Bitcoin fell 0.4% to $61,306.45, while Ethereum dropped 0.7% to $1,692.16.

-Reporting by Gregor Stuart Hunter; Editing by Jamie Freed/Reuters